A 

0 
0 
0 

7 
1 
2 

7 
2 
7 

UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 

7 

^ireagent's 
Lawbook- 


HINE  ^  NICHOLS 


1587 


THE  LIBRARY 

OF 

THE  UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 
GIFT  OF 


John  Hogan 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/agentshandbookofOOhineiala 


THE 


AGENT'S 


Hand  Book 


OF 


INSURANCE  LAW. 

(FIRE    INSURANCE.) 

HINE  &  NICHOLS. 


NEW  YORK: 
THE    INSURANCE    MONITOR. 

1887. 


Entered  accordins  to  Act  of  Congress  in  the  year  1887,  by  C.  C.  Hine,  in  the  OfBce  of  the 
Librarian  of  Congress,  at  Washington. 


T  , 


THIS   BOOK 

Is  intended  simply  as  a  legal  guide  to  the  agent.  It  aims  to  place  clearly 
before  him  those  principles  which  apply  to  his  every-day  work,  so  as  to 
enable  him  intelligently  to  perform  his  duties  as  a  representative  of  the  com- 
pany, and  guard  against  those  things  which  in  the  past  have  involved  com- 

?* 

i,  panics,  agents,  and  policy-holders  in  loss  and  trouble.     It  does  not  assume 

to  cover  the  whole  field  of  insurance  law.     It  is  not  written  for  the  lawyer, 
5  nor  is  it  designed  like  the  ordinary  text-book  to  be  cited  as  an   authority  in 
<^  the  courts,  or  in  determining  the  rights  of   parties   when  once  a  contro- 
-^  versy  has  arisen.      The  principle  adopted  in  its  preparation  has  been  to  treat 
those  matters  which  are  likely  to  involve  the  agent   or  his  company  in  diffi- 
culty as  things  to  be  avoided,  even  though  the  weight  of  authority  might  in 
some  cases  sustain  their  legality.     It  seeks  to  indicate  the  safe  channel  rather 
than  the  edges  of  the  shoals. 

Special  attention  is  given  to  those  matters  of  practical  importance  which 
•constantly  come  up  between  agent  and  company,  agent  and  policy-holder, 
«tc.,  while  things  not  relevant  to  the  agent's  immediate  work  are  not  elabo- 
rated. It  will  fill  a  place  not  heretofore  occupied,  but  a  place  which  con- 
fessedly needs  to  be  filled  in  the  interest  of  the  companies  and  their  agency 
representatives.  The  authorities  cited  are,  as  a  rule,  the  more  recent  decis- 
ions of  the  courts. 

CHARLES  C.  HINE. 

WALTER  S.  NICHOLS. 


THE  AGENT; 


HIS  RELATIONS  AND  RESPONSIBILITIES. 


His  Relations  to  his  Principal. 

The  legal  relations  of  principal  and  agent  are  the  same  in  insurance  as 
in  other  branches  of  business,  except  as  they  are  modified  by  the  special 
features  of  this  particular  occupation. 

The  commission  given  to  the  agent  by  his  principal  is  the  fountain 
from  whence  he  derives  all  his  authority,  this  and  such  written  or  verbal 
instructions  as  he  may  from  time  to  time  receive,  fix  the  limits  within 
which  he  is  at  liberty  to  act.  They  are  his  charter  and  by-laws.  The 
moment  he  steps  beyond  them  he  ceases  to  act  as  agent  or  to  represent 
his  principal  except  to  such  as  might  be  deceived  concerning  the  facts. 
He  becomes  a  mere  wrong-doer  and  is  liable  to  his  principal  for  any  injury 
that  may  result. 

Paley  on  Agency  by  Lloyd,  9,  10,  16,  17  ;  Ewell's  Evans  on  Agency,  223,  and  cases 
there  cited. 

While  insurance  agents  have  not  perhaps  been  prosecuted  so  often  by 
their  companies  for  violations  of  duty  as  have  those  engaged  in  some 
other  branches  of  business,  it  is  none  the  less  true  that  the  transgressing 
agent  can  always  be  held  responsible  by  his  company,  and  has  been  com- 
pelled in  a  number  of  cases  to  respond  in  damages. 

In  the  case  of  Phoenix  Ins.  Co.  vs.  Pratt,  decided  by  the  Supreme  Court 
of  Wisconsin,  Feb.  11,  1887,  and  reported  in  the  i6th  Ins.  Law  Journal, 
the  agents  had  issued  a  policy  on  a  certain  mill  which  was  afterwards 
found,  on  inspection  by  the  special  agent,  to  be  a  very  undesirable  risk. 
The  local  agents  were  thereupon  instructed  in  writing  to  relieve  the  com- 
pany of  the  risk  ' '  as  soon  as  possible. "  Instead  of  doing  so,  they  wrote 
requesting  that  it  might  run  to  expiration,  which  would  occur  a  few  days 
later ;  that  they  disliked  to  cancel,  and  it  would  be  a  personal  accommoda- 
tion. Within  four  days,  and  before  opportunity  for  a  reply,  the  risk  burned. 


The  company  sued  the  agents  for  damages,  alleging  neglect  to  cancel  as 
ordered.  The  Court  ruled  in  favor  of  the  company,  using  the  following 
language  :  "They  (the  agents)  were  bound  to  the  exercise  of  good  faith 
and  reasonable  diligence  in  discharging  the  duties  which  they  owed  to 
their  principal,  and  to  make  good  any  loss  or  damages  arising  from  any 
negligent  omission  on  their  part  in  departing  from  the  instructions  of  their 
superiors  in  the  management  of  the  company's  business  intrusted  to  them. 
*  *  *  If  the  agents,  from  a  mistaken  view  as  to  the  safety  of  the  risk  and 
the  wisdom  of  canceling  it,  or  for  any  cause  personal  to  themselves  as 
agents  of  the  company  delayed  acting,  it  was  at  their  own  peril." 

The  relation  of  the  agent  is  what  is  legally  termed  fiduciary,  that  is,  one 
of  trust  or  confidence  resembling  that  of  a  trusteeship.  For  this  reason 
the  law  demands  the  utmost  good  faith,  and  jealously  regards  any  conduct 
on  his  part  savoring  of  disloyalty  or  abuse  of  power.  The  liabilities  of  the 
agent  begin  the  moment  he  consents  to  act.  He  is  presumed  to  be 
capable  of  performing  the  work  which  he  undertakes,  and  is  not  excused 
for  an  injury  resulting  from  incapacity  or  neglect.  Where  an  agent  under- 
takes to  procure  an  insurance  or  is  instructed  to  cancel  a  risk,  and  acts  so 
negligently  that  loss  results,  he  is  liable  for  the  consequences. 

Wilkinson  vs.  Coverdale,  i  Esp.,  74  ;  Phoenix  Ins.  Co.  vs.  Frissell,  16  Ins.  Law- 
Jour.,  75  ;  also  Phoenix  Ins.  Co.  vs.  Pratt,  quoted  above. 

During  the  continuance  of  his  agency  he  cannot  represent  any  interest 
adverse  to  that  of  his  principal.  The  agent  has  no  legal  right  to  accept  a 
risk  or  a  modification  of  the  contract  which  he  knows  his  principal  would 
not  approve,  and  can  be  legally  compelled  to  surrender  any  profit  he  may 
gain  from  such  a  transaction. 

7  Story's  Eq.  Jur.,  §  218,  309  ;  Evans  on  Agency,  256. 

All  profits  made  in  connection  with  his  employment  beyond  such  as 
are  sanctioned  by  his  principal  belong  to  the  principal.  The  agency  can- 
not be  surreptitiously  used  for  personal  advantage.  If  the  agent  agrees 
with  the  insured  for  a  consideration  to  place  the  risk  in  a  company  which 
he  represents,  at  a  named  rate  of  premium,  or  to  waive  any  policy 
stipulation  adverse  to  the  applicant,  the  company  may  lawfully  claim  the 
consideration  which  he  receives. 

Evans  on  Agency,  243,  and  cases  there  cited  ;  Great  Western  Ins.  Co.  vs.  Cunliffe, 
L.  Rep.,  9  Ch.,  525. 

The  agent  cannot  bind  his  principal  by  any  contract  with  himself  with- 
out his  principal's  consent.  Where,  as  a  member  of  a  firm,  he  has  insured 
the  firm's  property  with  the  consent  of  the  general  agent,  he  cannot  by 
virtue  of  a  mere  understanding  with  the  other  members  of  the  firm  issue  a 


renewal  of  the  contract,  which  had  expired,  after  a  loss,  on  the  ground  of 
a  verbal  agreement  for  such  renewal  before  the  loss  occurred. 
Glens  Falls  Ins.  Co.  vs.  Hopkins,  14  Ins.  Law  Jour.,  317. 

Another  feature  of  this  fiduciary  relation  of  the  agent  is  his  obligation 
to  account  to  his  principal  for  the  business  of  the  agency.  He  cannot 
interpose  the  claims  of  third  parties  as  a  justification  for  withholding 
moneys  in  his  hands,  nor  can  he  refuse  or  neglect  to  render  an  account-  , 
ing  when  required.  Such  a  refusal  or  continued  neglect  would  be  good 
ground  for  forfeiting  his  commissions. 

Willard's  Eq.  Jur.,  104. 

The  general  rule  is  that  in  the  absence  of  an  understanding  to  the  con- 
trary the  agent  cannot  delegate  his  authority  to  another  in  matters  where 
his  personal  skill  or  discretionary  powers  are  involved,  unless  it  be  to  do 
a  merely  ministerial  act.  An  agent  who  is  authorized  to  contract  insur- 
ances may  delegate  to  his  sub-agent  the  mere  ministerial  duty  of  notifying 
the  applicant  that  the  risk  is  accepted  or  upon  what  terms  it  is  accepted, 
but  he  has  no  right  to  vest  a  sub-agent  with  any  discretionary  power  of 
determining  whether  the  risk  will  be  accepted  or  upon  what  terms,  unless 
his  principal  has  assented  to  such  a  delegation. 

Continental  Life  Ins.  Co.  vs.  Willetts,  24  Mich.,  268  ;  Evans  on  Agency,  38. 

In  insurance,  as  in  many  other  branches  of  business,  the  peculiar 
character  of  the  work  requires  and  contemplates  the  employment  of  sub- 
agents  and  clerks  by  agents  who  are  commissioned  by  the  company,  but  the 
powers  granted  to  such  subordinates  must  be  kept  strictly  within  the  line 
of  their  necessary  duties.  The  agent  is  liable  to  his  principal  for  any 
abuse  of  power  illegally  granted  to  a  sub-agent. 

Cases  frequently  arise  which  were  not  contemplated  or  clearly  provided 
for  in  the  commission  and  instructions  given  to  the  agent  In  all  such 
cases  the  rule  holds  that  the  agent  acts  upon  his  own  responsibility  the 
moment  he  goes  beyond  the  plainly  defined  line  of  his  authority,  and  in 
case  of  damage  resulting  he  can  only  be  justified  if  it  clearly  appear  that 
his  course  was  such  as  good  faith  to  his  principal  demanded.  Where  his 
authority  is  doubtful  the  same  rule  applies,  he  must  act  in  good  faith  and 
be  justified  by  the  circumstances  in  his  construction  of  his  power.  Where 
an  agent  is  instructed  generally  to  insure  the  cargo,  and  insures  under  a 
policy  limiting  the  liability  in  case  of  loss,  he  will  not  be  held  responsible 
unless  he  violated  his  orders  or  was  guilty  of  gross  negligence  or  fraud. 

Moore  vs.  Mourgue,  2  Cowp.,  479  ;  Boden  vs.  French,  10  C.  B.,  886. 

Of  course  every  specific  grant  of  authority  to  an  agent  involves  by  impli- 
cation whatever  powers  are  usual  or  necessary  for  the  purpose  of  executing 


8 

that  authority,  and  in  the  absence  of  specific  instructions  the  general  scope 
of  his  duties  must  aid  in  determining  what  authority  he  may  exercise. 
An  agent  has  an  impHed  right  to  investigate  concerning  the  origin  of  a 
suspicious  fire,  but  he  has  no  right  as  an  agent  to  institute  criminal  pro- 
ceedings. If  his  business  is  to  deliver  and  countersign  policies  he  has  no 
right  to  waive  proofs  or  adjust  losses,  and  the  insured  is  not  justified  in 
believing  him  to  have  such  power. 

Norman  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  827;  Bush  vs.  Ins.  Co.,  5  Ins.  Law  Jour.,  207. 
In  the  absence  of  anything  to  the  contrary  in  the  contract,  the  principal 
may  at  any  time  revoke  the  authority  granted  to  the  agent.  If  the  con- 
tract between  principal  and  agent  gives  a  continued  interest,  which  is 
rarely  the  case  in  fire  insurance,  the  revocation  of  authority  may  give 
rise  to  proper  claim  for  damages,  but  the  authority  to  represent  is  ended 
nevertheless,  and  strangers  must  deal  with  the  agent  at  their  peril  if 
notified.  The  principal  is  liable  for  labor  and  expense  already  properly 
incurred  by  his  agent,  but  not  for  future  gains  which  might  have  resulted 
had  the  agency  been  continued, 

Shaw  vs.  Ins.  Co.,  49  N.  Y.,  681;  Partridge  vs.  Ins.  Co.,  15  Wall.,  458. 

When  the  special  work  for  which  an  agent  has  been  delegated  has  been 
accomplished,  his  agency  ends  as  of  course,  and  when  the  power  has  been 
delegated  to  a  firm  it  will  terminate  with  the  dissolution  of  the  firm 
(unless  it  be  joint  and  several)  or  death  of  a  member. 

Marline  vs.  Ins.  Co.,  62  Barb.,  181;  Guthrie  vs.  Armstrong,  5  B.  and  Aid.,  628. 

Such  is  the  general  doctrine  concerning  the  relations  subsisting  between 
principals  and  agents,  and  this  doctrine  is  rendered  more  emphatic  by  the 
peculiar  and  delicate  nature  of  the  responsibilities  which  must  necessarily 
be  delegated  in  insurance.  It  is  indispensable  to  the  success  of  the  busi- 
ness, which  must  mainly  be  carried  on  at  a  distence  from  the  principal 
office,  that  large  discretionary  powers  must  be  granted  to  its  representa- 
tives, and  it  is  equally  impossible  for  the  companies  to  rigidly  define  the 
extent  of  those  powers  to  the  public  with  whom  they  deal.  Hence  it  is 
that  the  agent,  by  ignoring  or  violating  the  limitations  imposed  on  his 
authority,  is  in  special  danger  of  making  his  principal  responsible  for  acts 
in  excess  of  his  authority  where  the  party  with  whom  he  deals  has  a  right 
to  suppose  that  his  acts  are  authorized.  For,  as  between  the  company 
and  the  insured,  the  law  will  not  inquire  simply  what  was  the  actual 
authority  possessed  by  the  agent,  but  what  was  the  authority  which  the 
party  dealing  with  him  had  good  reason  to  suppose  he  possessed.  A 
large  percentage  of  the  disputes  and  litigations  in  which  companies  be- 
come involved  is  due  to  the  acts  of  their  representatives,  unintentional,  per- 
haps, but  clearly  in  excess  of  their  authority,  while  another  large  percentage 


is  traceable  to  the  ignorance  of  the  agent  concerning  the  legal  effect  of  his 
acts.  Hence  it  becomes  important  to  consider  the  different  classes  of 
agency  and  the  functions  of  each. 

The  Different  Kinds  of  Insurance  Agency  and  their  Functions. 

(a)  THE  broker. 

In  fire  insurance  two  broad  classes  of  agents  exist — those  who  act  for 
the  insured  and  those  who  act  for  the  company.  Among  the  former  is 
usually  classed  the  broker.  Strictly  speaking,  however,  the  broker  is  not 
exclusively  the  agent  of  either  party.  His  functions  are  those  of  an  in- 
termediary to  bring  the  two  principals  together.  So  long  as  he  acts  simply 
in  that  capacity  he  is  not  responsible  to  either  party  for  a  violation  of  the 
contract  between  them,  but  to  whatever  extent  he  acts  in  the  interest  of 
either  he  "becomes  the  agent  of  that  party. 

Lycoming  Ins.  Co.  vs.  Ward,  8  Ins.  Law  Jour.,  603  ;  Mann  vs.  Meyer,  8  Ins.  Law 
Jour.,  905  ;  Lycoming  Ins.  Co.  vs.  Rubin,  79  111.,  402. 

When,  without  any  prior  understanding  on  the  part  of  a  company  or 
its  agent,  a  broker  bargains  for  insurance  for  his  customer,  he  is  exclu- 
sively the  agent  of  the  applicant  in  the  work  of  securing  the  contract  and 
all  that  relates  to  it.  If  his  representations  are  false,  or  the  premium  has 
been  paid  into  his  hands,  or  he  has  been  employed  by  the  customer  to 
secure  a  modification  or  cancellation  of  the  policy,  the  latter  is  alone 
responsible. 

Standard  Oil  Co.  vs.  Ins.  Co.,  5  Ins.  Law  Jour.,  459 ;  Story  on  Agency,  §  134-5, 
451-2  ;  35  Barb.,  463. 

But  the  moment  he  is  intrusted  by  the  company  or  its  agents  with  the 
performance  of  any  duty  towards  the  company  he  becomes  to  that  extent 
the  agent  of  the  company.  If  intrusted  with  a  fully  executed  policy  for 
delivery  and  collection  of  the  premium  under  circumstances  which  justify 
the  insured  in  believing  that  he  is  authorized  to  receive  it  in  behalf  of  the 
company,  a  payment  to  the  broker  is  payment  to  the  company. 

Lycoming  Ins.  Co.  vs.  Ward,  ante  ;  Empire  Ins.  Co.  vs.  Mach.  Co.,  9  Ins.  Law 
Jour.,  399. 

The  mere  payment  of  commissions  according  to  a  prevailing  custom 
for  such  business  as  may  be  brought,  will  not  of  itself  make  the  broker 
the  company's  representative.  The  delicate  question  of  his  relationship 
in  each  case  must  be  determined  by  the  specific  circumstances.  A  party 
having  desk-room  in  an  agent's  office  and  accustomed  by  a  specific 
arrangement  between  them  to  bring  business  and  share  commissions,  was 


lO 

intrusted  by  the  agent  with  the  duty  of  obtaining  additional  information 
regarding  the  risk,  and  it  was  held  that  the  facts  justified  the  doctrine  that 
he  acted  for  the  company  in  securing  it. 
MuUin  vs.  Ins.  Co.,  15  Ins.  Law  Jour.,  561. 

A  broker  received  from  an  agent  of  the  insured  and  forwarded  a  risk  to 
an  agent  in  another  State,  who  placed  it  and  returned  a  fully  executed 
contract,  upon  which  the  broker  collected  but  retained  the  premium. 
The  argument  of  the  court  was  that  the  intrusting  of  such  an  instrument 
to  one  who  must  have  been  known  to  have  been  a  mere  broker  in  another 
State,  was  sufficient  to  justify  the  insured  in  regarding  him  as  authorized 
by  the  company  to  receive  it,  and  payment  to  him  became  payment  to  the 
company.  But  it  was  admitted  that  if  the  defalcation  had  been  due  to  the 
original  agent  of  the  insured  the  case  would  have  been  different.  A  dis- 
tinction was  made  between  the  relations  of  the  two. 

Universal  Ins.  Co.  vs.  Block,  15  Ins.  Law  Jour,,  219  ;  Pottsville  Ins.  Co.  vs.  Im- 
provement Co.,  4  Out.,  139. 

The  agency  of  the  broker  is  at  an  end  when  the  specific  purpose  for 
which  he  was  employed  has  been  accomplished.  A  broker  employed 
merely  for  procuring  insurance  is  not  the  agent  of  the  insured  for  receiv- 
ing notice  of  cancellation,  or  as  regards  any  subsequent  matter  pertaining 
to  the  risk. 

Von  Wain  vs.  Ins.  Co.,  15  Ins.  Law  Jour.,  158. 

The  safe  rule  for  agents  in  all  dealings  with  brokers  or  middle  men  is 
to  regard  them  as  vested  with  no  authority  by  the  insured  beyond  the 
mere  placing  of  the  risk,  unless  the  contrary  plainly  appears. 

(6)    THE    GENERAL    AGENT. 

The  term  general  agent  in  insurance  law  is  used  to  denote  those  who 
are  commissioned  with  plenary  power  to  act  for  the  company  in  the  trans- 
action of  certain  departments  of  its  business.  But  there  is  no  magical 
power  in  the  name  to  clothe  with  an  authority  greater  than  that  which  is 
formally  conferred.  Whatever  be  the  title,  the  legitimate  power  of  the 
agent  is  confined  to  that  which  is  actually  granted,  and  which  varies  all 
the  way  from  a  mere  solicitor  to  one  who  has  full  authority  to  make  and 
modify  contracts  and  settle  losses.  His  powers  are  usually  limited  by  the 
equipments  for  his  work.  The  possession  of  blank  policies  and  renewal 
receipts  duly  signed  are  the  usual  insignia  of  the  general  agent ;  and  his 
authority,  unless  otherwise  restricted,  extends  to  the  acceptance  of  risks, 
settlement  of  rates,  and  written  conditions  of  insurance,  in  fact,  to  all 
matters  pertaining  to  the  making  of  insurance  contracts  which  are  consistent 


II 

with  the  general  character  of  the  business.  If  not  forbidden,  he  may  waive 
the  premium,  consent  to  other  insurance,  and  even  modify  the  terms  of 
the  contract.  He  is  frequently  employed  temporarily  to  adjust  and  settle 
losses  as  well  as  to  receive  notice  and  proofs. 

Pechner  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  782  ;  Pitney  vs.  Ins.  Co.,  4  Ins.  Law  Jour., 
765  ;  Gloucester  Mfg.  Co.  vs.  Ins.  Co.,  5  Gray  498. 

But  it  does  not  follow  that  such  plenary  powers  are  vested  in  an  agent 
intrusted  with  blank  contracts.  The  right  to  make  a  contract  for  another 
does  not  necessarily  involve  any  rights  regarding  that  contract  after  it  has 
been  made,  and  the  power  of  the  general  agent  is  frequently  more  re- 
stricted regarding  the  contract  after  it  has  been  made  than  before,  by 
stipulations  in  the  contract  itself.  The  mere  authority  to  make  contracts 
of  insurance  does  not  imply  any  authority  to  adjust  losses  or  to  do  other 
acts  not  connected  with  the  granting  of  insurances. 

Post  vs.  Ins.  Co.,  43  Barb.,  351  ;  Bush  vs.  Ins.  Co.,  63  N.  Y,,  531  ;  Lohnes  vs.  Ins. 
Co.,  6  Ins.  Law  Jour.,  472. 

An  agent  who  is  not  specially  authorized  so  to  do  has  no  right  to  cancel 
contracts  already  made,  without  the  consent  of  his  principal. 
U.  S.  F.  Ins.  Co.  vs.  Tardy,  2  Ins.  Law  Jour. ,  60. 

And  generally  the  courts  distinguish  between  the  plenary  powers  granted 
to  general  agents  in  the  making  of  contracts  and  their  more  restricted 
powers  regarding  such  as  are  already  complete.  The  authority  of  the 
agent,  too,  is  restricted  by  the  territorial  limits  of  his  jurisdiction.  When 
he  assumes  to  represent  the  company  or  to  exercise  authority  beyond  these 
limits,  he  is  liable  to  the  company  as  for  any  other  unwarranted  assump- 
tion of  power. 

(c)    THE    SPECIAL    AGENT   AND    SOLICITOR. 

The  special  agent  is  one  who  is  intrusted  with  a  particular  duty  under 
a  limited  authority.  He  can  exercise  no  powers  beyond  those  specifically 
intrusted  to  him  and  such  as  naturally  flow  from  them.  The  duties  of 
the  solicitor  are  restricted  to  securing  applications  for  insurance.  Like 
the  broker,  he  is  a  sort  of  middle  man  for  bringing  together  the  company 
and  its  customers ;  but,  unlike  the  broker,  he  is  the  representative  of  the 
company  for  this  purpose,  and  his  obligations  wholly  lie  in  acting  in  its 
interest.  The  delivery  of  the  policy  when  executed  and  the  collection  of 
the  premium  are  also  frequently  added  to  his  duties,  and  the  possession 
of  application  blanks  and  of  executed  policies  and  renewals  for  delivery 
are  the  indices  of  his  powers.  It  is  his  duty  to  see  that  the  application  is 
correctly  understood  and  filled,  and  he  is  entitled  to  make  all  needed 
explanations  for  this  purpose.     He  is  bound  to  take  note  of  any  mis- 


12 

Statement  in  the  application  regarding  facts  of  which  he  has  a  personal 
knowledge,  and  he  has  no  right  to  knowingly  allow  a  misrepresentation 
concerning  the  risk  to  be  made  to  the  company,  for  the  latter  will  often 
be  held  responsible  for  facts  thus  known  to  its  agent.  The  neglect  of 
these  simple  precautions  has  caused  the  defeat  of  the  companies  in  many 
costly  suits. 

Planters'  Ins.  Co.  vs.  Myers,  7  Ins.  Law  Jour.,  and  cases  there  cited  ;  Boetcher  vs. 
Hawkeye  Ins.  Co.,  8  Ins.  Law  Jour.,  705  ;  Kingston  vs.  Ins.  Co.,  42  Iowa,  46. 

Note.  — The  language  of  the  law  and  the  language  of  the  shop  do  not  always  agree. 
A  GENERAL  agent  or  manager,  as  understood  in  the  craft,  is  one  clothed  with  mana- 
genal  and  executive  powers  second  only  to  those  of  the  officers  of  a  company,  one  to 
whom  the  local  or  resident  agents  of  a  State  or  of  several  States  report,  and  from 
whom  they  receive  their  instructions  ;  but  the  LOCAL  agent  may  be  "  General "  in  the 
sense  employed  in  legal  phraseology.  A  special  agent,  as  understood  in  the  craft, 
is  one  who  travels  from  the  Head  Office  or  General  Agency  clothed  with  supervisory 
powers,  an  expert  who  approves  or  cancels  contracts,  selects  local  agents,  and  other- 
wise represents  the  company  officially  or  semi-officially  ;  but  the  solicitor  or  sub-agent 
(frequently  the  clerk  or  employe  of  the  local,  and  wholly  unknown  to  the  company), 
is  sometimes  called  "Special"  in  the  language  of  the  courts.  If  the  legal  and  the 
professional  nomenclature  are  both  kept  in  mind,  no  confusion  need  arise  from  the 
terms  herein  used. 

So  in  regard  to  the  delivery  of  the  policy  and  collection  of  the  premium. 
Unless  specially  authorized  no  delivery  should  be  made  until  satisfactory 
payment  has  been  rendered,  for  the  acf  of  delivery  will  generally  bind  the 
company,  and  the  agent  is  personally  responsible  for  any  failure  to  collect 
the  premium. 

Farmers'  Ins.  Co,  vs.  Mann,  9  Ins.  Law  Jour.,  159  ;  Critchett  vs.  Ins.  Co.,  9  Ins. 
Law  Jour.,  594;  Rundle  vs.  Moore,  3  Johns.,  36. 

With  the  forwarding  of  the  application  or  delivery  of  the  contract  and 
receipt  of  premium  the  work  of  the  mere  solicitor  ends.  He  has  no  fur- 
ther powers  regarding  the  insurance.  He  has  no  right  to  waive  or  modify 
any  condition  of  the  policy,  consent  to  other  insurance  or  increase  of  risk, 
nor  do  any  other  thing  in  relation  to  the  contract  unless  specially  author- 
ized by  the  company.  His  knowledge  concerning  subsequent  matters  is 
not  the  knowledge  of  his  principal,  and  the  insured  has  no  right  to  assume 
that  he  has  such  powers.  He  has  no  right  to  make  a  preliminary  contract 
for  insurance. 

Bush  vs.'  Ins.  Co.,  5  Ins.  Law  Jour.,  257  ;  Morse  vs.  Ins.  Co.,  5  Ins.  Law  Jour., 
409  ;  Critchett  vs.  Ins.  Co.,  9  Ins.  Law  Jour.,  594. 

There  is  one  important  exception,  however,  to  this  rule.  Where  a 
renewal  of  the  original  contract  is  to  be  delivered,  the  agent  should  be 
careful  that  the  conditions  of  the  risk  have  not  been  materially  changed 


13 

within  his  knowledge,  and  that  the  representations  in  the  original  applica- 
tion are  still  true.  For,  by  intrusting  him  with  the  delivery  of  a  renewal 
the  company  is  liable  to  be  held  responsible  for  changes  of  which  he  has 
received  notice  from  the  insured. 

Whited  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  368. 

The  Doctrine  of  Waiver  in  its  Relations  to  the  Agent. 

No  legal  principle  is  fraught  with  more  consequence  to  the  companies 
in  the  conduct  of  agencies  than  that  involved  in  the  doctrine  of  waiver. 
If  the  express  limitations  to  the  agent's  authority  could  always  be  brought 
home  to  the  insured,  or  the  agent  himself  were  always  strict  and  careful 
in  the  performance  of  his  duty,  waiver  would  be  but  little  heard  of  in 
insurance.  It  arises  from  acts  or  conduct  which  are  inconsistent  with  the 
strict  terms  of  the  contract  itself.  Whenever  an  agent,  acting  within  the 
apparent  scope  of  his  authority,  does  that  which  will  justify  the  insured  in 
believing  that  some  provision  of  the  contract  has  been  modified  or  ex- 
punged, his  company  may  be  made  liable  for  the  results.  When  the 
solicitor,  in  taking  an  application,  knowingly  consents  to  a  false  or  incor- 
rect statement  of  the  facts  regarding  the  title,  character,  exposure,  or  any 
other  feature  inquired  about  concerning  a  risk,  and  the  applicant  in  good 
faith  relies  upon  the  agent,  the  responsibility  for  a  misrepresentation  which 
induces  its  acceptance  by  the  company  is  imposed  on  the  solicitor  him- 
self. 

Wright  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  251 ;  Hadley  vs.  Ins.  Co.,  4 Ins.  Law  Jour., 
611  ;  Stone  vs.  Ins.  Co.,  15  Ins.  Law  Jour.,  490  ;  Donnelly  vs.  Ins.  Co.,  15  Ins.  Law 
Jour.,  698. 

So  if  he  delivers  a  fully  executed  policy  and  trusts  for  payment  the  con- 
tract will  generally  be  binding,  but  he  will  be  himself  liable  for  the 
premium  unless  authorized  to  give  credit. 

Home  Ins.  Co.  vs.  Curtis,  5  Ins.  Law  Jour.,  120 ;  Washoe  Co.  vs.  Ins.  Co.,  5  Ins. 
Law  Jour.,  773  ;  Von  Wem  vs.  Ins.  Co.,  15  Ins,  Law  Jour.,  158. 

So  an  agent  who  has  power  to  contract  by  consenting  or  seeming  to 
consent  to  a  vacancy,  alteration,  increase  of  risk,  other  insurance,  incum- 
brance, or  any  modification  of  a  subsisting  contract  may  deprive  his 
company  of  its  right  to  protection  against  such  modifications,  or  by  his 
conduct  after  a  loss  may  mislead  the  insured  and  prevent  the  company 
from  securing  the  evidence  needed  to  determine  its  liability. 

Home  Ins.  Co.  vs.  Warehouse  Co.,  6  Ins.  Law  Jour.,  739  ;  Lycoming  Ins.  Co.  vs. 
Dunmore,  5  Ins.  Law  Jour.,  93  ;  Akin  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  341. 


14 

But  unless  the  insured  has  actually  been  misled  or  was  justified  in  rely- 
ing on  the  agent,  he  cannot  escape  the  responsibility  of  his  acts  by  charg- 
ing the  fault  on  the  agent.  He  cannot  justify  an  alienation  because  it 
was  known  to  a  mere  local  agent.  He  cannot  claim  to  be  insured  on  the 
strength  of  a  verbal  assurance  to  that  effect  by  an  agent  who  had  no 
power  to  contract.  He  cannot  claim  any  advantage  in  the  settlement  of 
his  loss  from  the  acts  of  an  agent  who  had  no  authority  to  do  more  than 
countersign  or  deliver  policies. 

Bush  vs.  Ins.  Co.,  5  Ins.  Law  Jour.,  257  ;  Morse  vs.  Ins.  Co.,  5  Ins.  Law  Jour., 
409  ;  Home  Ins.  Co.  vs.  Lindsey,  5  Ins.  Law  Jour.,  549. 

The  safe  rule  for  the  agent  is  to  avoid  all  acts  or  conduct  which  are 
liable  to  mislead  the  applicant  or  the  insured  either  as  to  his  own  author- 
ity or  the  company's  requirements.  Especially  is  this  necessary  on  the 
occurrence  of  losses,  where  a  peremptory  denial  of  liability  may  release 
the  claimant  from  the  necessity  of  furnishing  evidences  required  by  the 
company,  or  a  hasty  assumption  of  liability  and  a  corresponding  course 
of  conduct  may  prevent  the  interposition  of  defenses  against  an  un- 
righteous claim.  The  application  and  the  contract  define  in  most  cases 
the  true  course  of  procedure,  which  should  be  deviated  from  only  when 
circumstances  seem  to  demand  it.  In  general  an  agent  will  best  serve 
his  company  in  doubtful  cases  by  inaction,  except  in  acquiring  facts  and 
insisting  on  the  protection  of  property  while  awaiting  instructions  from 
Jieadquarters.     See  ' '  what  to  do  in  case  of  fire." 

The  Preliminary  Negotiations  and  the  Premium. 

However  limited  may  be  the  agent's  authority,  the  fact  that  the  repre- 
.sentations  in  the  application  are  the  basis  on  which  the  contract  is  made 
by  the  company,  renders  it  important  that  he  should  be  familiar  with  the 
law  of  the  contract  itself  Justice  to  the  applicant,  who  so  often  relies 
upon  his  advice  and  assistance,  as  well  as  to  his  company,  demands  that 
every  element  of  information  required  for  framing  the  contract  should  be 
free  from  ambiguity.  As  no  contract  is  said  to  be  complete  until  the  minds 
of  the  parties  are  in  accord  on  every  essential  point,  so  it  may  be  added 
•of  the  negotiations  for  insurance.  They  can  be  regarded  as  satisfactorily 
ended  only  when  every  pertinent  question  has  been  distinctly  settled. 
When  the  application  is  by  the  terms  of  the  policy  made  a  part  of  itself  or 
is  distinctly  referred  to  and  relied  on,  an  important  error  will  either  vitiate 
the  whole  insurance  or  make  the  agent  responsible  for  a  liability  on  the 
part  of  the  company  which  is  chargeable  to  his  fault. 

Rohrbach  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  737  ;  Continental  Ins.  Co.  vs.  Kasey,  4 
Ins.  Law  Jour.,  208. 


15 

Q 

Even  when  the  application  is  not  thus  incorporated  its  statements  are 
representations  used  to  secure  a  contract,  and  if  they  are  false  in  matters 
that  are  material  they  will  vitiate  the  insurance  unless  the  agent  was  at 
fault. 

Ryan  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  659;  Byers  vs.  Ins.  Co.,  9  Ins.  Law  Jour.,  743. 

All  applications  should,  if  possible,  be  reduced  to  writing  and  duly 
signed  by  the  applicant.  Mere  verbal  understandings  or  policies  procured 
on  the  agent's  personal  representations  are  not  only  open  to  all  the  inac- 
curacies, disputes,  and  misunderstandings  which  attend  verbal  arrange- 
ments of  any  kind,  but  they  impose  on  the  agent  a  responsibility  which 
belongs  entirely  to  the  insured.  The  agent  in  such  case  is  likely  to  find 
himself  in  the  attitude  of  a  sponsor  for  those  whose  risks  he  has  secured. 
In  case  of  a  disputed  loss  his  acts  and  conduct  are  the  subject  of  conten- 
tion between  the  parties  and  of  criticism  by  the  courts,  while  they  may  be 
condemned  by  both  parties  to  the  dispute,  and  an  unrighteous  loss  may 
thereby  be  imposed  upon  his  company. 

City  Ins.  Co.  vs.  Bricker,  9  Ins.  Law  Jour.,  784  ;  Baile  vs.  Ins.  Co.,  10  Ins.  Law 
Jour.,  657. 

Special  care  should  be  taken  in  all  negotiations,  against  the  use  of  lan- 
guage which  is  likely  to  convey  an  impression  that  the  bargain  is  com- 
pleted, especially  when  the  agent  has  been  intrusted  with  policy  blanks. 
As  a  rule  no  insurance  contract  should  be  made  complete  until  actually 
reduced  to  writing  and  the  premium  settled,  and  every  negotiation  should 
be  terminated,  if  successful,  by  a  clear  understanding  on  the  part  of  the 
applicant  that  the  contract  will  begin  with  the  delivery  of  the  written  in- 
strument. In  the  case  of  Putnam  vs.  Ins.  Co.  (7  Ins.  Law  Jour.,  550) 
the  agent  had,  on  account  of  the  hazardous  character  of  the  risk,  refrained 
from  issuing  the  policy  until  the  special  agent  should  inspect  the  building; 
but  though  no  premium  had  been  paid  he  had  justified  the  applicant  in 
believing  the  contract  was  complete,  and  the  company  was  compelled  to 
pay  the  loss.  In  the  case  of  Mann  vs.  Meyer  (8  Ins.  Law  Jour.,  905) 
and  again  in  that  of  Revere  Ins.  Co.  vs.  Chamberlin  (10  Ins.  Law  Jour., 
397)  the  agents  involved  both  themselves  and  their  companies  in  trouble 
by  orally  agreeing  for  insurange,  and  then  undertaking  to  issue  a  written 
contract  after  the  fire  had  occurred,  and  where  in  one  case  the  fact  of  the 
loss  was  kept  concealed  from  the  agent  until  the  policy  had  been  secured. 
It  should  be  borne  in  mind  that  where  an  agent  is  authorized  to  contract 
the  mere  omission  of  the  policy  will  not  prevent  a  contract  from  being 
enforced  if  there  has  been  a  valid  agreement ;  a  court  of  equity  will  com- 
pel the  issue  of  a  policy. 

Franklin  Ins.  Co.  vs.  Taylor,  5  Ins.  Law  Jour.,  671. 


i6 

No  negotiations  for  insurance  are  complete  until  the  parties  have  agreed 
upon  those  things  which  are  essential  to  enable  a  court  to  frame  the  con- 
tract. These  are  the  subject-matter  of  the  risk,  the  amount  of  indemnity, 
the  commencement  and  duration  of  the  risk,  and  the  amount  and  terms 
of  payment  of  the  premium.  It  is  not  necessary  that  all  of  these  should 
be  specifically  stated.  Thus,  the  usual  time  of  one  year,  the  usual  form 
of  policy,  and  the  usual  terms  of  payment  may  all  be  presumed  if  there  is 
noihing  to  the  contrary.  But  any  uncertainty  regarding  what  property  was 
to  be  covered,  or  for  how  much,  or  what  premium  would  be  charged, 
obviously  could  not  be  supplied,  and  a  negotiation  in  which  these  points 
or  any  others  of  essential  importance  remained  unsettled  would  be  un- 
finished. The  same  is  true  where  something  further  remains  to  be  done 
or  settled  before  contracting. 

Eames  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  689  ;  Strohn  vs.  Ins.  Co.,  37  Wis.,  625  ; 
Millville  Mut.  Ins.  Co.  vs.  Collerd,  38  N.  J.,  480;  Walker  vs.  Ins.  Co.,  81ns.  Law 
Jour.,  847. 

Thus,  in  the  case  of  Millville  Mut.  Ins.  Co.,  just  cited,  the  applicant  held 
the  policy  under  advisement,  without  paying  the  premium,  while  |;ie  investi- 
gated the  standing  of  the  company.  This  was  held  not  to  be  a  completed 
contract.  So  in  the  case  of  Walker,  a  note  was  given  for  the  premium 
with  the  understanding  that  it  was  to  be  returned  if  the  application  was 
not  accepted,  and  the  contract  was  decided  to  be  incomplete.  The  agent 
should  be  particularly  guarded  against  allowing  the  insured  to  believe  the 
agreement  is  complete  until  the  premium  has  actually  been  settled  ;  for, 
if  clothed  with  sufficient  authority,  he  may  otherwise  by  his  conduct  un- 
intentionally waive  its  payment.  All  the  terms  of  the  insurance  in  like 
manner  should  conform  to  what  the  agent  has  reason  to  believe  that  the 
company  will  insist  on,  for  a  verbal  contract  if  once  completed  becomes 
the  real  contract  between  the  parties,  and  the  insured  can  compel  the 
company  to  comply  with  it  in  its  written  policy.  But  when  the  policy 
has  once  been  accepted  by  the  insured  this  will  supersede  the  oral  agree- 
ment unless  the  insured  has  in  some  way  been  misled  or  misrepresented 
by  the  agent. 

Southern  Ins.  Co.  vs.  Yates,  and  cases  there  cited,  6  Ins.  Law  Jour.,  394. 

Where  the  agent  has  power  to  bind  temporarily  until  the  company  can 
be  consulted,  as  little  as  possible  should  be  left  to  the  memory.  The 
ad  interim  receipt  should  state  with  sufficient  fullness  all  the  essential  con- 
ditions of  the  insurance,  and  a  recording  agent  should  always  bear  in 
mind  that  actual  payment  of  premium  is  not  essential  to  the  completion 
of  an  oral  contract. 

Davenport  vs.  Ins.  Co.,  17  Iowa,  276  ;  Hamilton  vs.  Ins.  Co.,  5  Barr.,  Pa.,  339. 


17 

Nor  is  it  always  essential  that  a  thorough  understanding  should  have  been 
arrived  at  touching  the  conditions  of  insurance  if  these  have  been  left  to 
the  agent's  discretion.  In  Ellis  vs.  Ins.  Co.  (50  N,  Y.,  502)  the  selection 
of  a  company  had  been  left  to  the  agent,  who  unknown  to  the  insured  had 
made  a  selection;  this  completed,the  contract.  In  Ins.  Co.  vs.  Taylor  (5 
Ins.  Law  Jour.,  671 )  the  agent  rendered  his  company  liable  by  leading  the 
applicant  to  believe  that  the  insurance  was  complete,  when  in  fact  his  au- 
thority, in  the  class  of  risks  involved,  was  limited  to  forwarding  the  applica- 
tion. The  evidence  being  conflicting  as  to  knowledge  by  the  applicant.  All 
applications  should  be  promptly  forwarded  to  the  company  and  the  result 
communicated  to  the  applicant ;  for,  when  he  has  been  led  to  believe  that 
this  will  be  done,  both  the  agent  and  his  company  may  be  liable  for  the 
consequences  of  unreasonable  delay. 

Walker  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  847. 

Even  though  the  applicant  personally  fills  and  signs  the  blank,  the 
agent  is  likely  to  be  called  on  to  explain  the  meaning  of  the  terms,  and 
his  tacit  assent  to  the  language  employed  when  he  has  reason  to  doubt  its 
correctness  may  relieve  the  insured  from  responsibility  for  misstatements. 
Inadvertance  or  suppression  of  knowledge  on  the  part  of  the  agent  when 
securing  the  application  may  deprive  the  company  of  its  protection  against 
false  representations.  Thus  in  Westchester  Fire  Ins.  Co.  vs.  Earle  (5  Ins. 
Law  Jour.,  61)  the  fact  of  an  agent  doing  some  act  to  mislead  the  insured, 
or  remaining  silent  when  he  ought  to  have  spoken,  was  adjudged  sufficient 
to  defeat  a  clause  relating  to  other  insurance  ;  and  the  same  rule  was 
again  enforced  in  Kitchen  vs.  Hartford  Ins.  Co.  (14  Ins.  Law  Jour.,  594) 
where  he  was  verbally  informed  of  the  facts  at  the  time  the  application 
was  filled.  So  in  Van  Schaick  vs.  Ins.  Co.  (68  N.  Y.,  434)  and  in 
Williams  vs.  Ins.  Co.  (12  Ins.  Law  Jour.  708)  tacit  knowledge  concern- 
ing defective  title  by  the  agent  bound  his  company.  It  is  of  the  first 
importance,  therefore,  that  the  solicitor,  as  well  as  the  recording  agent, 
should  understand  the  laws  governing  the  specified  features  of  the  contract 
itself,  which  we  shall  shortly  discuss  from  the  agent's  standpoint. 

When  the  negotiations  are  conducted  by  correspondence  it  has  been  a 
matter  of  no  little  debate  in  the  courts  as  to  when  a  perfect  agreement 
has  been  reached.  By  some  it  has  been  insisted  that  a  proposition  made 
on  behalf  of  the  insured  is  complete  the  moment  an  unconditional  answer 
of  acceptance  has  been  mailed  by  the  insurer.  By  others  it  has  been 
held  that  the  contract  is  only  complete  when  the  insured  has  received 
the  notice  of  its  acceptance.  The  former  seems  the  better  view,  and  is 
certainly  safer  for  the  guidance  of  the  agent.  No  policy  nor  acceptance 
of  any  kind  should  be  forwarded  to  a  sub-agent  for  delivery  unless  the 


i8 

latter  is  at  the  same  time  granted  a  discretionary  power  to  withhold  the 
acceptance  or  the  agent  is  prepared  to  close  the  contract  on  the  spot.  For 
the  sub-agent  by  such  an  act,  in  the  absence  of  discretionary  power,  is 
made  a  mere  medium  of  communication,  and  the  acceptance  is  beyond 
recall  the  moment  it  first  passes  from  the  agent's  control. 

Halleck  vs.  Ins.  Co.,^  26  N.  J.,  268  ;  I^mes  vs.  Ins.  Co.,  6  Ins.  Law  Jour.  68g  ; 
City  Ins.  Co.  vs.  ZoUer,  4  Ins.  Law  Jour.,  478. 

For  the  same  reason  completed  policies  should  not  be  sent  to  a  solicitor 
•without  discretion  as  to  their  withholding  ;  for,  even  though  they  stipulate 
that  they  are  not  binding  until  the  receipt  of  premium,  it  has  been  held 
that  such  a  sending  is  practically  a  delivery  to  the  insured,  which  will 
waive  the  condition  as  to  payment. 

Eames  vs.  Ins.  Co.,  supra. 

Again,  in  the  delivery  of  the  policy,  the  agent  should  never  rely  on 
such  a  clause  for  protection  in  case  the  premium  is  not  at  once  paid  ;  for, 
as  has  been  said,  an  unqualified  delivery  is  a  presumption  that  credit  for 
the  premium  is  intended. 

Von  Wein  vs.  Ins.  Co.,  15  Ins.  Law  Jour.,  158  ;  Eagan  vs.  Ins.  Co.,  6  Ins.  Law 
Jour.,  832  ;  Bowman  vs.  Ins.  Co.,  5  Ins.  Law  Jour.,  9. 

Unless  the  agent  is  authorized  and  intends  to  give  such  credit,  if  the 
circumstances  require  a  delivery  of  the  policy,  it  should  be  made  with  a 
written  stipulation  that  it  shall  only  be  in  force  upon  actual  payment 
Unless  the  agent  is  authorized  to  give  credit,  he  renders  himself  personally 
liable  to  his  company  by  absolutely  surrendering  the  policy  or  absolutely 
contracting  in  any  way  without  first  receiving  the  premium. 

Paley  on  Agency  by  Lloyd,  9,  10,  16,  17  ;  Ewell's  Evans  on  Agency,  307. 

So,  if  the  agent  charges  himself  with  a  premium  that  is  not  received,  he 
assumes  personal  responsibility  for  a  completed  contract,  and  must  look 
to  the  insured  as  to  any  other  debtor  for  his  re-imbursement.  For  the 
same  reason,  too,  no  agreement  should  be  made  with  a  broker  by  which 
the  latter  is  charged  with  the  premium,  unless  it  is  intended  that  the 
•  policy  shall  be  binding  and  the  broker  alone  responsible  for  the  pay- 
ment 

Bang  vs.  Ins.  Co.,  i  Hughes,  290 ;  Wheeler  vs.  Ins.  Co.,  10  Ins.  Law  Jour.,  354  ; 
Eagan  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  832. 

Caution  should  be  used  in  accepting  payment  of  premium  where  the 
question  of  contracting  is  referred  to  the  decision  of  a  higher  authority. 
Such  conditional  acceptance  will  not  make  a  binding  contract,  but  in 
case  of  dispute  it  will  be  claimed  as  evidence  in  favor  of  a  completed 


19 

contract,  and  the  agent's  receipt  should  always  show  that  the  premium  is 
to  be  returned  unless  the  risk  is  accepted. 

Walker  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  847. 

Adjustments  of  premium  through  personal  accounts  between  the  agent 
and  the  applicant  should,  so  far  as  possible,  be  avoided.  While  the 
law  permits  an  agent  in  good  faith  to  agree  with  the  applicant  that  pay- 
ment may  be  made  through  the  canceling  of  an  obligation,  or  in  some 
other  form  than  cash,  so  long  as  the  applicant  has  no  reason  to  believe 
that  a  cash  payment  is  essential,  it  does  not  look  with  favor  on  this 
mode  of  dealing,  and  absolutely  forbids  the  utilizing  of  the  agency  in 
this  way  for  the  personal  advantage  of  the  agent  against  the  interest  of 
his  principal.  If  the  insured  has  reason  to  believe  that  such  a  method 
of  settlement  will  not  be  acceptable  to  the  company,  much  more  if  he 
Icnows  that  it  is  a  fraud  on  the  rights  of  the  principal,  it  will  not  be  sus- 
tained. In  Hoffman  vs.  Ins.  Co.  (4  Ins.  Law  Jour.,  398)  an  attempted 
settlement  of  premium  was  made  through  the  barter  of  a  horse,  and  the 
court  declared  that  it  was  a  fraud  upon  the  company,  that  an  agent  can 
only  bind  his  company  by  acts  done  in  the  usual  line  of  his  business. 

Upton  vs.  Mills,  1 1  Cush.,  586 ;  Story's  Agency,  Sec.  60  and  note  ;  i  Pars,  on  Cont., 
41,42. 

If  an  agent  in  the  exercise  of  his  discretion  accepts  a  note  for  the 
premium,  he  must  bear  in  mind  that  the  failure  to'pay  such  a  note  when 
due  will  not,  unless  specially  stipulated,  aifect  the  validity  of  the  policy. 
Until  the  policy  is  canceled  in  the  ordinary  way  the  only  remedy  will 
be  a  suit  on  the  note,  and  if  the  insured  is  not  responsible  he  will  secure 
Jhis  insurance  for  nothing. 

Wilson  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  880  ;  Shakey  vs.  Ins.  Co.,  7  Ins.  Law  Jour., 
-223. 

The  acceptance  of  the  application  by  an  agent  authorized  to  contract, 
or  the  entry  by  him  of  a  brief  memorandum  describing  the  risk,  when 
done  with  the  intent  to  issue  a  policy,  is  sufficient,  without  some  under- 
standing to  the  contrary,  to  make  a  binding  contract,  and  the  agent  in 
thus  concluding  the  negotiations  should  be  careful  that  his  intention 
should  be  carefully  understood,  unless  he  regards  the  contract  as  actually 
in  force. 

Thus,  in  Franklin  Ins.  Co.  vs.  Taylor  (5  Ins.  Law  Jour,,  671)  the 
agent  who  took  the  application  did  not  inform  the  applicant  that  it 
must  be  forwarded  for  approval,  but  led  him  to  believe  that  the  assur- 
ance was  complete,  and  his  company  was  held  to  be  liable.  In  Con- 
tinental Ins.  Co.  vs.  Jenkins  (5  Ins.  Law  Jour.,  514),  on  the  other  hand, 


20 

there  was  a  series  of  negotiations  which  resulted  simply  in  an  agree- 
ment as  to  the  terms  on  which  the  applicant  might  insure,  if  he  chose, 
and  assurance  by  the  agent  that  he  would  accept  the  terms  when  prof- 
fered. No  proffer,  however,  was  made  until  after  the  loss,  and  it  was 
held  that  no  valid  contract  had  been  made. 

See  also  Patterson  vs.  Ins.  Co.,  5  Ins.  Law  JoUr.,  376  ;  Taylor  vs.  Ins.  Co.,  8  Ins. 
Law  Jour.,  851  ;  Stron  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  680  ;  Weeks  vs.  Ins.  Co.  7  Ins. 
Law  J"ur.,  552  ;  Moody  vs.  Ins.  Co.,  9  Ins.  Law  Jour.,  276. 

Filling  in  the  Policy  or  Application. 

Unless  dictated  or  suggested  by  the  agent,  the  language  in  the  applica- 
tion is  presumed  to  be  that  of  the  applicant,  for  which  the  company  is 
not  responsible.  But  with  the  policy  the  language  used  is,  under  all 
circumstances,  that  of  the  insurer,  who  is  assumed  by  the  courts  to  be 
expert  in  its  use.  The  consequence  is  that  any  vagueness  in  the  terms 
of  the  latter  or  anything  indefinite  in  its  language  will  be  construed  in  a 
sense  that  is  most  favorable  to  the  insured.  Misrepresentations  and 
palpable  violations  of  policy  conditions  are  likely  to  be  excused  by  the 
courts  if  it  can  be  shown  from  the  wording  of  the  policy  that  the  insured 
might  have  had  a  reasonable  doubt  as  to  the  misrepresentation  or  viola- 
tion. 

Miller  vs.  Ins,  Co.,  7  Ins.  Law  Jour.,  378  ;  West  vs.  Ins.  Co.,  5  Ins.  Law  Jour., 
430;  Rann  vs.Ins.  Co.,  5  Ins.  Law  Jour.,  515;  Miller  vs.  Ins.  Co.,  7  Ins.  Law  Jour.,  378. 

This  rule  is  particularly  true  of  the  written  portions  which  are  so  often 
filled  in  by  the  agent.  These  are  properly  regarded  as  expressing  the 
intentions  of  the  insurer  in  each  individual  case,  and  any  language  used 
in  them  which  may  be  inconsistent  with  the  printed  portions  will  over- 
ride the  latter. 

JEtna,  Ins.  Co.  vs.  Jackson,  13  B.  Mon.,  242  ;  Benedict  vs.  Ins.  Co.,  31  N.  Y.,  389  ; 
Reynolds  vs.  Ins.  Co. ,  47  N.  Y. ,  597. 

The  same  principles,  of  course,  control  the  language  of  the  application 
in  so  far  as  the  agent  is  responsible  for  it.  The  selection  of  appropriate 
language  therefore  becomes  in  both  cases  of  the  utmost  importance. 
No  reliance  should  be  placed  on  any  previous  understandings  or  verbal 
agreements.  These  will  be  entirely  disregarded  by  a  court  if  the  written 
instrument  can  be  interpreted  without  them.  If,  for  instance,  a  policy 
be  written  on  "  tools, "  a  verbal  understanding  that  certain  classes  of 
tools  were  not  included  will  have  no  effect.  The  only  exception  to  this 
rule  is  where  it  clearly  appears  that  a  fraud  has  been  perpetrated  or  tha.t 
both  parties  intended  something  different. 

Lovewell  vs.  Ins.  Co.,  7  Ins.  Law  Jour.,  672  ;  Southern  Ins.  Co.  vs.  Yates,  6  Ins. 
Law  Jour.,  394. 


21 

The  first  and  most  general  rule  regarding  the  choice  of  words  in  filling 
a  policy  or  application  is  that,  if  possible,  they  should  convey  to  the 
popular  mind  just  what  is  intended  ;  for  the  first  question  that  will  be 
asked  by  a  court  is,  not  what  the  agent  meant,  but  how  would  the  in- 
sured naturally  understand  the  language.  If  the  idea  is  one  which  is 
naturally  or  necessarily  embodied  in  technical  terms,  such  terms  should 
be  chosen,  if  possible,  as  have  a  well-understood  meaning  either  in  the 
community  or  the  particular  branch  of  business  in  which  the  insured  is 
engaged ;  and  in  no  case"  should  technical  words  be  employed  which 
mean  one  thing  with  the  underwriter  and  are  liable  to  mean  another  to 
the  insured.  If  words  have  more  than  one  sense  or  meaning  it  should 
be  borne  in  mind  that  the  meaning  most  favorable  to  the  insured,  or 
which  will  give  the  largest  indemnity,  will  usually  be  adopted  by  the 
court.  While  the  meaning  may  not  be  distorted  or  stretched  to  embrace 
what  was  clearly  not  intended,  whenever  terms  are  employed  which  may 
fairly  indicate  an  aggregate  or  collection  of  risks  they  will  so  be  con- 
strued. Thus  a  factory  may  be  interpreted  as  meaning  a  collection  of 
buildings ;  a  stock  of  dry-goods  or  groceries  may  include  a  great  variety 
of  articles  which  do  not  strictly  belong  to  either  line  of  trade ;  household 
furniture  may  cover  articles  which,  taken  apart  from  the  rest,  are  not 
ordinarily  spoken  of  as  furniture. 

Germania  Ins.  Co.  vs.  Francis,  6  Ins.  Law  Jour.,  235  ;  Hewitt  vs.  Ins.  Co.,  10  Ins. 
Law  Jour.,  375  ;  Houghton  vs.  Ins.  Co.,  10  Ins.  Law  Jour.,  547  ;  Harris  vs.  Ins.  Co., 
4  Ins.  Law  Jour.,  799  ;  Blake  vs.  Ins.  Co.,  12  Gray,  265  ;  Peoria  Ins.  Co.  vs.  Lewis, 
18  111.,  562  ;  Moadinger  vs.  Ins.  Co.,  2  Hall,  490. 

In  all  cases  of  doubt  the  best  practical  guide  for  the  agent  is  to  regard 
the  question  from  the  standpoint  of  the  insured,  and  judge  whether  the 
language  is  likely  to  be  construed  as  including  more  than  was  intended. 
Technical  words  that  have  a  fixed  and  thoroughly  understood  meaning 
in  a  particular  business,  and  which  are  there  universally  used  to  express 
the  idea  intended,  are  usually  the  safest  and  best  to  use  in  such  business. 
In  Daniels  vs.  Ins.  Co.  (12  Cush. ,  430)  the  Court  said:  "The  general 
rule  is  that  if  any  person  or  any  company,  foreign  or  domestic,  shall 
engage  in  any  department  of  business,  they  must  be  presumed  to  be 
acquainted  with  the  rules  and  usages  of  such  business,  to  be  conversant 
with  the  language  employed  in  it,  whether  strictly  technical  or  not 

See  also  Houghton  vs.  Ins.  Co. ,  supra,  and  cases  there  cited. 

But  the  agent  should  be  on  his  guard  not  to  confound  this  technical 
use  of  words  with  a  frequent  practice  of  employing  them  by  many  parties 
in  a  loose  or  modified  sense.     The  courts  never  allow  the  claim  of 


22 

usage  to  override  the  ordinary  meaning,  unless  the  use  is  so  general  as  to 
fix  a  special  meaning. 
Myers  vs.  Carl,  30  L.  J.,  Q.  B.,  9 — s.  c,  7  Jur.,  N.  S.,  97. 

Another  danger  to  be  specially  guarded  against  in  filling  a  policy  is 
that  of  overriding  its  express  stipulations  by  impliedly  assuming  a  risk 
that  is  inconsistent  with  such  stipulations.  If  the  employment  of  a  dan- 
gerous oil  or  the  keeping  of  a  dangerous  explosive  is  a  well-understood 
part  and  parcel  of  any  trade  or  business,  a  hhk  taken  on  such  a  business 
will  be  assumed  to  permit  a  continued  use  or  keeeping  of  the  dangerous 
material  in  spite  of  a  general  prohibition  to  the  contrary.  Whenever  it 
is  desired  to  restrict  any  practice  or  usage  that  is  common  in  connec- 
tion with  a  risk,  that  intention  should  be  made  clear  in  the  written  por- 
tion of  the  policy. 

Buchanan  vs.  Ins.  Co. ,  4  Ins.  Law  Jour.,  458  ;  Bayly  vs.  Ins.  Co.,  4  Ins.  Law  Jour., 
503  ;  Carrigan  vs.  Ins.  Co.,  10  Ins.  Law  Jour.,  606. 

Not  only  should  the  agent  be  fairly  conversant  with  the  character  of 
the  particular  trade  or  business,  in  order  to  intelligently  write  the  policy, 
but  he  should  thoroughly  understand  the  legal  import  of  the  various 
terms  commonly  in  use  in  the  fire  insurance  contract,  which  we  shall 
consider  further  along. 

From  what  has  been  said,  not  only  the  great  importance  of  well- 
chosen  words  will  be  seen,  but  also  the  importance  of  letting  each  party 
to  the  contract  speak  for  himself.  Where  it  is  possible  to  avoid  it,  the 
agent  should  never  fill  up  an  application,  that  is  the  province  of  the 
applicant ;  and  if  he  is  sufficiently  intelligent  to  do  it  correctly  he  should 
do  it  alone.  It  is  difiicult  for  a  man  to  serve  two  masters,  and  in  the 
case  of  an  insurance  agent  he  is  in  danger  of  being  adjudged  by  the 
court  to  occupy  a  position  exactly  opposite  from  the  one  he  intended,  if 
he  helps  an  applicant  fill  up  an  application. 

Davenport  vs.  Teoria  Ins.  Co.,  17  Iowa,  276  ;  (Beebe  vs.  Hartford  Ins.  Co.,  25 
Conn.,  51  ;  Pierce  vs.  Nashua  Ins.  Co.,  50  N.  H.,  297  ;  Rowley  vs.  Empire  Ins.  Co., 
36  N.  Y.,  550;  2  Parsons  on  Contracts,  535,  661,  and  notes  ;  Swan  vs.  Watertowu 
Ins.  Co.,  Pa.  S.  C,  10  Ins.  Law  Jour.,  392. 

Who  may  be  Insured. 

The  law  allows  an  insurance  to  be  effected  by  any  party  who  has 
such  an  interest  in  the  property  that  direct  pecuniary  injury  is  likely  to 
result  from  its  damage  through  fire ;  but  that  interest  must  be  of  an 
essentially  legal  character,  not  a  mere  expectancy.  A  man  may  be  the 
expectant  heir  of  a  millionaire,  but  he  has  no  right  to  insure  the  property 
of  the  latter  unless  he  has  some  legal  claim.     A  son  has  no  right  on 


23 

account  of  his  mere  relationship  to  insure  his  father's  property.  On  the 
other  hand,  a  man  living  on  mere  sufferance  on  property,  and  caring  for 
it  under  an  agreement  that  it  shall  eventually  become  his,  has  been  al- 
lowed to  insure. 

Baldwin  vs.  Ins.  Co.,  12  Ins.  Law  Jour.,  371  ;  Barracliffe  vs.  Ins.  Co.,  13  Ins.  Law 
Jour.,  190,  and  cases  there  cited ;  Agricultural  Ins.  Co.  vs.  Montague,  7  Ins.  Law 
Jour.,  708.  ^ 

So  parties  in  temporary  possession  or  control  of  property,  under  cir- 
cumstances where  they  would  be  liable  in  case  of  loss  or  where  they 
would  be  justified  in  acting  for  the  owner,  and  those  having  liens  of  any 
kind  where  there  is  danger  of  a  moneyed  loss  through  its  destruction, 
are  allowed  by  the  law  to  insure.  , 

Harvey  vs.  Cherry,  7  Ins.  Law  Jour.,  315  ;  Babson  vs.  Ins.  Co.,  4  Ins.  Law  Jour., 
50  ;  Rohrbach  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  737  ;  Franklin  Ins.  Co.  vs.  Martin,  8 
Ins.  Law  Jour.,  134. 

More  than  this,  such  parties  need  not  state  the  nature  of  their  interest 
at  all,  unless  it  is  called  for,  and  are  often  permitted  to  recover,  not 
simply  what  they  are  shown  to  have  lost,  but  what  it  is  possible  they 
may  have  been  injured.  Such  being  the  laxity  or  liberality  of  the  law, 
the  temptations  to  fraud  are  obviously  strong,  and  the  companies  for 
their  own  protection  generally  insist  that  the  nature  and  extent  of  the 
applicant's  interest  shall  be  clearly  stated.  Any  failure  to  do  this  through 
the  remissness  or  blunder  of  the  insured  is  likely  to  defeat  his  insurance, 
and,  if  through  the  fault  of  the  agent,  may  involve  both  himself  and  his 
company  in  trouble.  It  by  no  means  follows  that  an  applicant  should 
be  granted  insurance  because  the  law  will  support  a  policy  issued  to  him. 
On  the  contrary,  policies  should  be  restricted,  as  far  as  possible,  to  the 
principal  parties  in  interest,  or  those  having  the  actual  title  to  the  prop- 
erty; leaving  the  rights  of  others  to  be  secured  by  proper  indorsements 
regarding  payment  of  the  loss,  or  else  should  include  as  many  interests 
as  possible.  Where  it  is  necessary  to  separately  insure  subordinate  in- 
terests their  character  should  be  closely  scrutinized,  and,  whatever  their 
title  or  interest,  care  should  be  taken  that  there  shall  be  no  temptation 
to  fraud.  The  nature  of  these  various  interests  will  now  be  examined 
more  in  detail. 

Martin  vs.  Ins.  Co.,  15  Ins.  Law  Jour.,  371. 

Note. — These  details  are  given,  not  to  enable  an  agent  to  practice  upon  them,  but  to 
warn  him  against  them.  A  book  of  this  character  would  be  incomplete  were  these 
points  omitted  ;  but  the  agent  is  urgently  recommended  to  limit  his  writings  to  parties 
who  are  actual  owners,  and  to  decline  all  complicated  cases  until  he  has  fully  corre- 
sponded  with  his  company,  advised  it  of  the  nature  of  the  case  in  hand  in  every  detail, 


24 

and  received  special  authority  to  entertain  the  proposed  risk.  In  this  connection  the 
agent  is  referred  to  other  portions  of  this  book  wherein  the  limitations  of  his  authority 
and  his  legal  liabilities  for  exceeding  that  authority  are  treated.  It  is  always  safe  to 
be  on  the  safe  side. 

The  Subject-matter  of  Insurance. 

buildings. 

* 

The  term  "building"  signifies  a  single  structure  or  edifice  complete 
in  itself,  regardless  of  the  uses  to  which  it  may  be  put.  So  "house," 
"barn,"  "shed,"  and  the  like  are  simply  particular  classes  of  buildings. 
But  such  words  as  "factory,"  "mill, "and  "store,"  having  special  refer- 
ence to  the  business  or  occupation,  have  sometimes  been  allowed  to 
include  a  number  of  collective  buildings  used  for  one  general  purpose. 

Hews  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  291  ;  Brugger  vs.  Ins.  Co.,  8  Ins.  Law  Jour., 
293  ;  Bigler  vs.  Ins.  Co.,  20  Barb.,  635. 

For  this  reason  the  words  "building,"  "house,"  and  the  like  should 
be  added  when  describing  a  risk  which  might  otherwise  be  indefinite, 
as  "mill  .building"  or  "  building "  used  as  a  factory.  A  building  in- 
cludes whatever  permanent  attachments  to  the  structure  in  the  shape  of 
fixtures  go  with  the  realty  in  case  of  sale  and  which  are  an  integral  part 
of  the  structure  itself.  Thus  gas  and  water  pipes,  stationary  tubs  and 
basins,  and  the  like,  are  an  integral  part  of  the  building.  So  in  some 
cases  shafting  and  other  fixed  machinery,  when  manifestly  necessary  for 
the  use  for  which  the  building  was  designed,  have  been  treated  by  the 
courts  as  a  part  of  the  structure,  the  rule  being,  when  the  language  is 
not  clear,  to  seek  the  intention  of  the  parties.  For  this  reason  care 
should  be  taken  to  except  from  a  policy  all  such  articles  as  are  not  in- 
tended to  be  included,  but  which  might  naturally  be  regarded  as  belong- 
ing to  the  structure.  Church  bells,  clocks,  and  organs,  shafting,  belts, 
stationary  engines,  mirrors,  or  other  ornaments  so  fastened  that  their 
removal  would  mar  the  appearance  of  the  walls,  when  these  are  the 
property  of  the  insured,  should  generally  be  excepted  or  else  specifically 
included  to  avoid  all  controversy. 

Brugger  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  293  ;  McKeage  vs.  Ins.  Co.,  9  Ins.  Law 
Jour.,  598  ;  Liebenstein  vs.  Ins.  Co.,  9  Ins.  Law  Jour.,  588. 

The  word  ' '  fixtures  "  in  the  sense  in  which  it  has  just  been  used  as 
denoting  component  parts  of  the  building  itself  should  seldom,  if  ever, 
be  employed  in  the  policy.  Its  use  in  insurance  is  restricted  to  such 
fixtures  as  are  personal  property,  trade-fixtures  as  they  are  called,  which 
a  tenant  is  at  liberty  to  remove  from  the  building.     When  a  building  is 


25 

fitied  up  for  occupancy  as  a  store  or  factory,  for  instance,  certain  perma- 
nent fittings  may  be  added  by  the  owner  or  by  the  tenant  to  adapt  it  to 
its  purpose,  these  are  part  of  the  realty.  There  are  others,  such  as 
counters  and  chandeHers,  which,  though  actually  fastened  to  the  build- 
ing by  the  tenant,  are  simply  for  his  own  use  in  his  business,  and  which 
the  law  allows  him  to  remove,  and  are  the  only  proper  subjects  to  be  in. 
sured  as  trade-fixtures.  The  others  are  included  in  a  risk  on  the  build- 
ing.    If  intended  to  be  excluded  it  is  safer  to  say  so. 

Whitemarsh  vs.  Ins.  Co.,  i6  Gray,  369  ;  Brugger  vs.  Ins.  Co.,  and  McKeage  vs. 
Ins.  Co.,  supra. 

A  building  or  house  will  usually  include  such  wings  or  additions  as 
are  naturally  a  part  of  it. 

Blake  vs.  Ins.  Co.,  12  Gray,  265  ;  Workman  vs.  Ins.  Co.,  2  La.,  507. 

This  fact  should  particularly  be  borne  in  mind  where  the  insurance  is 
on  goods  or  merchandise ;  and  if  it  be  desired  to  restrict  the  risk,  the 
specific  portion  of  the  building  should  be  designated.  .  In  all  cases 
where  the  risk  includes  more  than  a  main  building  it  is  better  to  add 
"and  extension  "  or  "wing,"  if  such  is  the  intention  of  the  agent  at  the 
time.  But  such  words  should  not  be  used  to  describe  a  detached  adja- 
cent structure,  this  is  a  separate  building  and  should  be  so  treated. 

Peoria  Co.  vs.  Ins.  Co.,  15  Ins.  Law  Jour.,  52. 

The  term  " dwelling"  indicates  that  the  principal  use  of  the  building 
is  for  purposes  of  private  residence,  and  should  never  be  used  exclusively 
where  it  is  in  part  used  for  other  purposes,  as  for  a  store,  a  workshop, 
or  for  any  purpose  which  increases  the  risk ;  for  the  law  is  that  if  the  term 
does  not  fairly  indicate  the  real  character  of  the  premises  or  a  part  is 
occupied  for  purposes  which  by  the  provisions  of  the  policy  increase  the 
risk  the  insurance  will  be  forfeited,  and  the  same  rule  applies  to  other 
classes  of  hazards. 

White  vs.  Assurance  Co.,  8  Gray,  556;  Sarsfield  vs.  Ins.  Co.,  61  Barb.,  479;  Lap- 
pin  vs.  Ins.  Co.,  58  Barb.,  325  ;  Franklin  Ins.  Co.  vs.  Martin,  8  Ins.  Law 
Jour.,   134. 

Again,  the  terms  building,  dwelling,  etc. ,  include  only  such  materials 
as  are  actually  incorporated  in  them,  not  unfinished  materials  that  may 
be  on  the  ground  and  intended  to  be  incorporated. 

EUmaker  vs.  Ins.  Co.,  5  Penn.  St.,  183. 

Store,  mill,  factory,  etc.,  refer,  as  has  been  said,  to  the  specific  use  of  the 
property,  and  unless  properly  qualified,  may  include  adjacent  premises 
not  intended  to  be  covered,  and  will  include  not  simply  the  buildings 
themselves,  but  such  adjuncts  in  the  shape  of  fixed  machinery  and  the 


-      26 

like  as  are  essential  to  make  a  complete  factory  or  mill.  Where  ma- 
chinery or  adjuncts  of  any  kind,  which  are  not  strictly  a  part  of  the  build- 
ing, are  to  be  included  in  a  policy  on  the  building,  they  should  be 
separately  mentioned,  or  specifically  excluded  if  so  intended. 

Hews  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  291;  Harris  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  799* 
ClafFey  vs.  Ins.  Co.,  15  Ins.  Law  Jour.,  237  ;  Fair  vs.  Ins.  Co.,  4  Ins,  Law  Jour,,  114  ; 
Liebenstein  vs.  Ins.  Co.,  45  111.,  303. 

The  term  "  machinery  "  is  a  broad  one,  and  has  been  sometimes  ex- 
tended by  the  courts  to  include  tools  and  other  appurtenances  needed  for  a 
complete  manufactory,  as  well  as  what  is  more  strictly  implied  by  the 
word,  where  such  appeared  to  be  the  intention  of  the  parties.  In 
other  cases  it  has  been  given  a  more  restricted  meaning,  and  tools  have 
been  distinguished  as  simple  instruments  used  by  hand.  So  implements 
used  in  connection  with  machinery  have  been  held  to  constitute  a 
part  of  it. 

Lovewell  vs.  Ins.  Co.,  7  Ins.  Law  Jour.,  672  ;  Seavey  vs.  Ins.  Co.,  3  Ins.  Law 
Jour.,  576. 

The  term  "tools"  has  also  been  given  a  very  broad  definition  by  the 
courts.  In  Lovewell  vs.  Ins.  Cos,.,  supra,  the  policy  covered  "their  fixed 
and  movable  machinery,  engines,  lathes  and  tools,"  and  it  was  held  that 
the  term  "tools"  included  all  patterns  which  from  their  size  and  shape 
admitted  of  being  applied  and  managed  by  the  hands  of  one  man  ! 

All  such  adjuncts  of  a  manufacturing  risk  therefore  should  be  sepa- 
rately specified  whether  excluded  or  otherwise,  as  "on  fixed  and  mova- 
ble machinery  "  (the  one  referring  to  that  which  attaches  to  the  realty, 
the  other  to  such  as  is  of  the  nature  of  trade-fixtures)  "except"  or 
"  including  tools,  patterns,  engines,  boilers, "  etc.  But  where  these  sub- 
jects are  separately  insured  in  the  policy,  this  of  itself  will  exclude  them 
from  the  general  class.  The  essential  feature  to  be  aimed  at  in  describ- 
ing a  risk  of  any  kind  is  to  make  the  intention  so  clear  that  there  can  be 
no  doubt  what  property  is  meant.  The  location  of  the  property,  by 
street  and  number  if  possible,  is  of  course  always  essential,  and  in  case  of 
adjoining  or  adjacent  structures  on  the  same  premises,  all  the  distinctive 
marks  needed  to  discriminate  the  particular  building  from  the  others,  such 
as  height,  area,  material,  or  use,  should  be  added. 

The  temptation  to  describe  a  risk  under  some  kindred  name  which 
will  make  it  appear  more  favorable  to  the  company  is  sometimes  a  strong 
one  ;  but  is  decidedly  dangerous  for  the  applicant.  If  the  misrepresenta- 
tion is  material,  or  the  apparent  motive  a  fraudulent  one,  the  insurance 
will  be  defeated.  A  saloon  is  not  a  hotel,  and  such  a  misdescription  of  a 
low  rum-hole  in  Baker  vs.  Ins.  Co.  (15  Ins.  Law  Jour.,  887)  defeated  the 


27 

policy.  In  Loehner  vs.  Ins.  Co,  (19  Mo.,  628)  a  house  of  ill  fame  was 
described  as  a  dwelling,  and  the  court  ruled  that  if  its  use  enhanced  the 
risk  the  company  was  not  liable.  In  Claffey  vs.  Ins.  Co.  (15  Ins.  Law 
Jour.,  237)  property  was  insured  as  the  "Wolf  houses, "  and  the  claim 
was  made  that  this  description  included  a  barn  as  part  of  the  group.  A 
town  insurance  company  in  Wisconsin  was  allowed  to  insure  certain 
classes  of  risks  only  upon  a  vote  of  its  members,  one  of  such  risks  was  a 
schoolhouse  which  had  been  insured  as  a  dwelling,  but  had  been 
altered  for  this  purpose.  The  supreme  court  of  that  State  declared  in 
Luthe  vs.  Ins.  Co.  (12  Ins.  Law  Jour.,  30)  that  the  insurance  was  void. 
In  Maher  vs.  Ins.  Co.  (6  Ins.  Law  Jour.,  103)  property  which  was  in  part 
used  for  a  grocery  was  described  by  the  agent  as  a  dwelling,  and  so 
insured  because  he  deemed  the  description  sufficient.  The  doubts  of 
the  applicant  regarding  its  property  were  actually  quieted  by  the  assur- 
ances of  the  agent ;  but  the  court  refused  to  consider  these  facts  and  de- 
clared the  contract  forfeited. 

These  are  a  few  of  the  many  cases  which  might  be  cited,  showing  the 
importance  of  correctly  designating  the  character  of  the  risk. 

Personal  Property. 

Personal  property  as  a  subject  of  insurance  differs  in  several  important 
respects  from  buildings.  The  latter  are  fixed  in  one  place,  the  former  is 
movable.  Hence,  the  designation  of  the  location  of  personal  property  is 
generally  the  most  important  feature  of  the  whole  risk.  Where  insurance 
is  on  specific  property  of  this  kind  the  policy  will  follow  the  property  from 
place  to  place  unless  the  intention  to  insure  only  while  in  the  place 
named  clearly  appears..  Mere  statements  as  to  present  location,  such  as 
"stored  in  barn,"  have  sometimes  been  held  to  be  intended  only  to 
designate  more  clearly  the  property  covered  and  not  to  restrict  its  re* 
moval. 

Everett  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  121  ;  Smith  vs.  Ins.  Co.,  32  N.  Y.,  399; 
Blood  vs.  Ins,  Co.,  12  Cush,,  472. 

The  intention  therefore  to  limit  the  policy  to  the  place  of  storage  or 
deposit  should  be  made  plain.  The  words  ordinarily  used  for  this  pur- 
pose are  ' '  contained  in. "  The  courts  are  now  agreed  that  these  words 
will  thus  restrict  the  policy  in  the  case  of  such  subjects  as  furniture  on 
storage  or  a  stock-in-trade  which  could  not  reasonably  be  expected  to  be 
temporarily  elsewhere  as  an  incident  to  its  use.  But  with  regard  to 
that  large  class  of  subjects  whose  use  involves  a  frequent  or  even  occa- 
sional removal,  the  clause  will  only  mean  that  they  are  to  be  in  the  place 


28 

designated  when  such  use  does  not  require  their  absence.  Thus  horses 
and  wagons  *'  contained  in  "  a  barn  may  be  covered  while  in  use  on  the 
road,  or  temporarily  located  elsewhere  for  repairs  or  in  the  prosecution  of 
business.  Wearing  apparel  may  be  covered  while  being  worn  on  the 
street. 

McCluer  vs.  Ins.  Co.,  5  Ins.  Law  Jour.,  743  ;  Noyes  vs.  Ins.  Co.,  15  Ins.  Law  Jour., 
57,  and  cases  there  cited  ;  Phoenix  Ins.  Co.  vs.  Voorhis,  15  Ins.  Law  Jour.,  865. 

Special  care  on  this  point  should  be  taken  in  case  of  such  shifting  risks 
as  rolling-stock  on  steam  and  horse  railroads  which  are  likely  to  be 
absent  the  greater  part  of  the  time,  and  the  provision  should  be  added 
that  "this  policy  applies  only  while  contained  in,"  etc.,  in  all  such 
cases.  Unless  the  particular  part  of  the  building  in  which  it  is  contained 
is  also  specified,  the  insured  property  can  be  removed  to  any  other  part. 
Thus  a  manufacturer  insured  while  occupying  only  a  single  story,  may 
afterwards  extend  his  business  to  the  whole  building  and  be  covered  by  a 
policy  simply  on  stock  contained  in  the  building,  or  the  occupant  of  one  of 
three  stores  in  one  building  may  in  the  same  way  afterwards  occupy  them 
all  by  tearing  away  the  partitions  and  converting  them  into  a  single  store. 

Fair  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  114 ;  West  vs.  Ins.  Co.,  9  Allen,  316. 

A  second  feature  in  which  personal  property  diifers  from  buildings  is 
that  the  latter  are  specific  in  their  character,  the  former  often  is  not.  A 
policy  on  a  building  may  cover  slight  alterations  and  additions  so  long  as 
it  remains  substantially  the  same  structure,  but  will  not  cover  a  new  build- 
ing put  in  the  place  of  the  old,  or  a  building  so  altered  as  to  be  a  sub- 
stantially different  structure. 

Maryland  Ins.  Co.  vs.  Gusdorf,  5  Ins.  Law  Jour.,  384  ;  Fair  vs.  Ins.  Co.,  4  Ins. 
Law  Jour.,  ;ii4  ;  Lyman  vs.  Ins.  Co.,  14  Allen,  329  ;  Imbrey  vs.  Ins.  Co.,  5  Gray, 
541. 

But  in  the  case  of  personal  property  the  policy  generally  covers  whatever 
property  may  be  within  the  description  at  the  time  of  loss,  whether  it  be 
the  specific  material  included  at  the  time  of  contracting  or  not.  An  in- 
surance on  a  stock  of  groceries  or  dry-goods  allows  the  insured  to  sell  and 
substitute  other  and  different  articles  or  to  enlarge  his  stock.  The  articles 
composing  household  goods  may  be  exchanged  for  others ;  the  only  lim- 
itation being  that  the  subject  shall  tally  with  the  description.  Hence  it  is 
important  that  any  limitations  which  it  is  desired  to  impose  on  the  sub- 
stitution or  addition  of  other  articles  should  be  clearly  indicated  in  the 
policy.  A  policy  on  "the  specific  goods  or  furniture  now  contained  in," 
etc.,  or  "consisting  of,"  etc,  would  not  allow  others  to  be  added  or  sub- 
stituted.    An  insurance  on  the  "stock  of  groceries,  excepting  gasoline. 


29 

gunpowder,"  etc.,  may  be  necessary  to  prevent  such  dangerous  articles 
from  being  added  to  the  stock  ;  for  the  written  portion  of  a  policy  will 
control  provisions  that  are  merely  printed,  and  it  has  been  frequently  held 
that  an  insurance  on  a  class  of  goods  among  which  certain  articles  are 
generally  kept,  will  be  understood  as  a  license  to  keep  such  articles,  not- 
withstanding a  printed  provision  to  the  contrary. 

Amer.  Ins.  Co.  vs.  Rothschild,  82  111.,  116  ;  Germania  Ins.  Co.  vs.  Francis,  6  Ins. 
Law  Jour.,  235;  Boynton  vs.  Ins.  Co.,  16  Barb.,  254;  Moadinger  vs.  Ins.  Co.,  2 
Hall,  490. 

The  particular  class  of  articles  intended  to  be  covered  should  be  as 
strictly  defined  as  their  nature  will  admit.  Such  words  as  "contents" 
will  include  almost  anything  in  the  shape  of  personal  property ;  and,  if 
employed,  should  be  further  qualified  by  "consisting  of,"  etc.,  which 
limits  the  insurance  to  such  as  are  enumerated,  while  the  word  "includ- 
ing "  imposes  no  restrictions  whatever,  but  rather  the  reverse. 

Moadinger  vs.  Ins.  Co.,  supra;  Rafael  vs.  Ins.  Co.,  7  La.  An.,  244. 

The  terms  "household  goods"  and  "furniture"  refer  to  those  articles 
intended  for  the  adornment  or  comfort  of  the  house,  which  are  remov- 
able at  will.  They  do  not  include  clothing  and  jewelry  ;  articles  for  con- 
sumption, such  as  food  and  coal ;  nor  goods  that  may  be  kept  simply  as 
merchandise  for  sale,  unless  such  appears  to  have  been  the  intention. 
"Clothing"  and  "wearing  apparel"  in  like  manner  do  not  include 
jewelry. 

Longueville  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  845  ;  Holmes  vs.  Ins.  Co.,  10  Met, 
211  ;  Clarey  vs.  Ins.  Co.,  i  Ben.,  432. 

Stock  of  "goods"  and  "merchandise,"  on  the  contrary,  refer  to  chat- 
'  tels  of  any  kind  kept  for  sale;  while  "stock-in-trade"  may  include  even 
implements  used  in  case  ot  a  manufacturing  business.     Like  "contents," 
they  are  very  broad,  and  should  be  further  qualified  when  used. 

Planters'  Ins.  Co.  vs.  Engle,  9  Ins.  Law  Jour.,  71  ;  Moadinger  vs.  Ins.  Co.,  supra; 
Boynton  vs.  Ins.  Co.,  16  Barb.,  254. 

When  properly  qualified  as  "stock  of  hardware,"  or  "dry-goods,"  or 
"groceries,"  only  such  articles  will  be  included  as  belong  to  the  particular 
class  named.  But  if  it  is  customary  to  include  among  such  stock  articles 
which  are  not  strictly  dry-goods  or  groceries,  the  courts  will  hold  that  the 
parties  intended  to  cover  them  also  in  the  policy.  Thus,  insurance  on 
"his  stock  as  a  country  grocer,"  will  cover  all  those  articles  which  it  is 
usual  for  country  grocers  to  keep. 

Collins  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  353  ;  Medina  vs.  Ins.  Co.,  120  Mass.,  225 ; 
Franklin  Ins.  Co.  vs.  UpdegraflF,  43  Penn.  St.,  353. 


30 

It  frequently  happens,  too,  that  the  class  of  goods  thus  insured  includes 
articles  which  are  expressly  forbidden  by  the  policy  to  be  kept,  or  which 
are  required  to  be  specifically  mentioned  in  order  to  be  included.  Now, 
the  prevailing  disposition  of  the  courts  is  to  overrule  all  such  printed 
limitations  and  prohibitions,  if  the  language  used  in  describing  the  risk 
indicates  an  intention  on  the  part  of  the  agent  to  waive  the  prohibition. 
Thus,  a  policy  as  above  on  stock  such  as  is  "  usually  kept  in  a  country 
store  "  has  been  allowed  to  override  a  prohibitory  clause,  the  courts  argu- 
ing that  it  was  the  intention  to  insure  such  prohibited  articles  as  belong 
to  the  stock.  Therefore,  the  intention  on  this  point  should  be  made 
plain  in  the  description.  ' '  Except  such  as  are  herein  prohibited,"  or,  if 
the  risks  are  classified  in  policy-schedules  as  ' '  hazardous, "  etc. ,  on  "  mer- 
chandise not  hazardous,"  or  language  of  similar  import,  will  show  that 
the  parties  intended  to  exclude  the  prohibited  risks. 

Jones  vs.  Ins.  Co.,  2  Ins.  Law  Jour.,  186  ;  Pindar  vs.  Ins.  Co.,  i  Ins.  Law  Jour., 
127  ;  Franklin  Ins.  Co.  vs.  Updegraff,  supra  ;  Steinbach  vs.  Ins.  Co.,  8  Ins.  Law 
Jour.,  621. 

It  rarely  happens  that  the  subjects  of  insurance  can  be  enumerated  under 
one  specific  name,  as  pianos  or  wheat  or  horses ;  though  this  should  be 
done,  if  possible,  but  the  name  must  generally  be  that  of  a  class,  as  hard- 
ware or  wooden  ware,  etc.  The  rule,  therefore,  should  be  to  describe  the 
risk  under  that  class  name  which  is  the  most  restricted  as  well  as  most 
expressive.  Horned  cattle  should  be  insured  as  such,  not  simply  as  cattle 
or  as  live-stock,  which  latter  will  include  poultry,  hogs,  horses,  etc.  Hard- 
ware should  be  insured  as  such,  not  simply  as  merchandise ;  and  where 
articles  prohibited  in  the  policy  are  included  in  the  stock,  the  intention 
either  to  exclude  or  include  them  should  be  made  plain  in  the  description. 
The  effect  of  these  various  policy  prohibitions  will  be  considered  more  at " 
length  further  on.  All  live-stock  should  be  specially  insured  under  its 
class  name,  as  horses,  oxen,  etc. ;  not  as  contents,  merchandise,  and  the 
like,  for  the  latter  are  usually  treated  as  referring  simply  to  inanimate 
objects.  Such  vague  words  as  contents  and  appliances  should  never  be 
jelied  on  as  descriptive  of  property.  In  Washington  Ins.  Co.  vs.  Davison 
{30  Md.,  91)  the  intention  of  the  term  apparatus  in  a  factory  risk  extended 
the  policy  to  virtually  everything  connected  with  the  manufacture. 

Not  only  is  it  to  the  interest  of  the  company  but  also  of  the  insured, 
that  the  subject-matter  should  be  described  as  specifically  as  possible. 
Otherwise,  property  that  was  intended  by  the  applicant  to  be  included 
may  not  be  covered.  In  Raphael  vs.  Ins.  Co.  (7  La.  An.,  244)  the 
subject-matter  was  insured  simply  as  "stock  of  jewelry  and  clothing," 
while  it  consisted  also  of  musical  and  surgical  instruments,  guns,  and 


31 

"books,  all  of  which  were  thus  excluded  from  the  policy.  In  Burgess  vs. 
Ins.  Co.  (lo  Allen,  221)  the  insurance  was  on  "merchandise"  in  certain 
buildings,  and  articles  intended  partly  for  use  were  excluded.  A  policy 
on  a  "stock  of  hair  wrought,  raw,  and  in  process  as  a  retail  store,"  did 
not  include  such  articles  as  were  not  hair.  This  neglect  to  indicate  the 
specific  character  of  the  slock  has  led  to  repeated  disputes  in  the  courts. 
Stock  in  case  of  a  manufacturer  of  any  kind  may  mean  much  more  than 
in  case  of  a  merchant.  With  the  latter  it  is  usually  confined  to  goods  for 
sale,  with  the  former  it  may  include  all  the  articles  used  in  carr}'ing  on 
his  business.  Thus  in  case  of  a  furniture  dealer  it  has  included  his  varnish 
and  oils,  and  in  the  case  of  a  baker,  his  sieves,  pans,  and  troughs. 

Medina  vs.  Ins.  Co.,  120  Mass.,  225  ;  Moadinger  vs.  Ins.  Co.,  2  Hall,  490  ;  Haley 
vs.  Ins.  Co.,  12  Gray,  545. 

So  where  the  risk  has  simply  been  designated  as  a  "  starch  factory  "  all 
the  machinery,  tools,  and  fixtures  needed  for  the  factory  have  been  held 
to  be  included,  and  such  terms  as  lumber-yard  and  ship-yard  have  some- 
times been  allowed  to  cover  materials  stored  on  the  street,  outside  of  the 
yard  proper.  A  policy  on  a  **  saw-mill "  was  in  like  manner  held  to  in- 
clude the  machinery ;  hence,  the  importance  of  insuring  mills,  factories, 
churches,  and  the  like  as  buildings. 

Bigler  vs.  Ins.  Co.,  20  Barb.,  635  ;  Peoria  Ins.  Co.  vs.  Lewis,  18  111.,  553  ;  Webb 
vs.  Ins.  Co.,  2  Sandf.,  447. 

Just  what  should  be  included  in  "  machinery, "  too,  has  been  repeatedly 
questioned,  and  since  it  has  sometimes  been  extended  to  all  those  articles 
used  in  connection  with  the  machinery  proper,  it  should  be  further  quali- 
fied when  necessary.  Engines  and  boiler-houses  should  be  separated  in 
the  policy  from  factory  buildings  and  machinery. 

Leavey  vs.  Ins.  Co.,  iii  Mass.,  540  ;  See  also  ante. 

Every  class  of  articles  which  can  be  appropriately  separated  from  the 
rest  should  not  only  be  specifically  mentioned,  but  where  practicable 
specifically  insured,  and  in  case  of  a  subsequent  increase  of  the  amount 
insured  under  a  renewal,  the  specific  insurances  should  be  re-apportioned 
in  the  renewal  receipt,  otherwise  the  renewal  will  be  a  general  insurance 
of  the  whole. 

Driggs  vs.  Ins.  Co.,  10  Barb.,  440. 

Memorandum  Articles. 

Where  large  values  are  concentrated  in  small  compass,  as  in  the  case  of 
money  and  jewelry,  or  where  the  articles  are  exceedingly  fragile,  as  with 
plate-glass  and  decoration,  or  the  subjects  have  a  high  value  to  the  owner. 


32 

but  are  comparatively  worthless  to  others,  as  deeds  and  account-books,  it 
is  plain  that  without  proper  precautions  a  company  may  unwittingly  be 
involved  in  a  heavy  loss  or  be  called  on  to  respond  for  an  excessive 
claim.  In  regard  to  another  large  class  like  trade-fixtures,  as  has  been 
seen,  its  status  is  often  indefinite  and  liable  to  dispute.  For  these  rea- 
sons all  policies  contain  a  list  of  memorandum  articles  which  will  not 
be  covered  unless  specially  mentioned.  Articles  thus  specified  will  not 
be  included  under  any  term  which  may  be  merely  descriptive  of  their 
general  character.  They  will  not  form  a  part  of  insured  ' '  contents, " 
watches  will  not  be  included  in  "wearing  apparel,"  manuscripts  will  not 
be  covered  by  a  policy  on  "books,"  nor  plate-glass  windows  by  insur- 
ance on  the  "building,"  where  these  are  among  the  memorandum 
articles.  Where  insurance  is  desired  the  subject  must  be  mentioned 
under  its  particular  name,  as  watch,  or  jewelry,  or  plate-glass. 

The  uncertain  value  of  many  memorandum  articles  furnishes  a  strong 
objection  against  their  insurance  at  all  \)y  the  companies,  and  when  prop- 
erty of  this  character  is  insured,  whether  strictly  speaking  a  memorandum 
article  or  not,  care  should  be  exercised  about  its  valuation.  For  insur- 
ance purposes  the  value  of  an  article  is  only  what  it  would  bring  if  sold, 
not  what  it  may  be  worth  to  the  owner ;  that  is  its  legal  value.  A 
manuscript  may  represent  years  of  work,  a  deed  or  account-book  if  lost 
would  perhaps  secure  a  handsome  reward  for  its  return,  but  none  of 
them  would  have  any  commercial  value  and  are  practically  uninsurable. 
All  subjects  having  a  very  uncertain  commercial  value,  such  as  pictures 
and  statuary,  should  be  insured  with  great  caution,  and  if  covered  at  all, 
should  be  by  schedule  naming  a  separate  valuation  on  each. 

Specific  Description  of  the  Property. 

Not  only  is  it  important  that  the  character  of  the  risk  as  a  dwelling, 
planing-mill,  stock  of  hardware,  etc.,  be  correctly  stated,  but  that  all  de- 
tails that  may  be  inquired  about  (and  such  as  are  not  inquired  about,  if 
they  essentially  modify  the  character  of  the  risk)  should  also  be  fully  and 
correctly  given.  In  Steinmetz  vs.  Ins.  Co.  (6  Phila.,  21)  the  use  of  a 
fifth  story  by  nine  or  ten  persons  regularly  employed  in  making  shades, 
converted  the  building  in  part  into  a  factory,  and  the  failure  to  state  the 
fact  forfeited  the  policy.  In  Mathews  vs.  Ins.  Co.  (2  Cin.  Sup.  Ct, 
109)  the  policy  was  on  a  "planing-mill  and  saw-mill ;"  one  story,  how- 
ever, was  used  as  a  carpenter's  shop,  and  the  failure  to  state  this  fact  for- 
feited the  policy.  In  Dewees  vs.  Ins.  Co.  (35  N.  J.,  366)  property  was 
insured  as  a  "country  store,"  but  it  turned  out  that  a  part  of  it  was  being 
used  as  a  stable,  and  the  insurance  was  avoided.     In  Lapin  vs.  Ins.  Co. 


33 

(58  Barb.,  325)  property  insured  as  a  "dwelling"  was  used  in  part  as  a 
saloon,  and  the  policy  was  forfeited. 

These  cases  illustrate  the  importance  of  furnishing  full  details  regard- 
ing such  matters  as  may  modify  the  character  of  the  risk,  even  though 
there  may  be  nothing  in  the  application  or  policy  directing  special  atten- 
tion to  them.  So  in  regard  to  personal  property,  as  has  been  already- 
pointed  out,  property  insured  under  any  class  name  as  hardware,  dry- 
goods,  cattle,  and  the  like  will  only  cover  such  as  the  parties  evidently 
intended  by  the  term  used.  Thus,  in  Allegre  vs.  Ins.  Co.  (8  G.  &  J., 
190),  the  court  declared  that  an  insurance  on  live-stock  must  be  specific, 
they  could  not  be  covered  simply  by  a  policy  on  the  cargo ;  and  in  Wol- 
cott  vs.  Ins.  Co.  (4  Pick.,  449),  neither  the  animals  nor  their  food  were 
allowed  to  be  included  in  such  a  policy,  while,  as  will  be  shown  far- 
ther on,  the  presence  of  prohibited  articles  or  employments  may  forfeit 
the  entire  policy.  In  Appleby  vs.  Ins,  Co.  (54  N.  Y.,  253)  a  policy 
covering  cabinet  ware,  which  is  a  finished  article,  was  avoided  by  the 
added  work  of  putting  together  and  finishing  chairs  as  well. 

When  inquiry  is  made  as  to  the  height  of  the  building,  the  cellar  is 
not  in  law  one  of  the  stories  ;  neither,  perhaps,  would  an  attic  be  in- 
cluded in  case  of  a  peaked  roof,  but  if  there  be  a  basement  it  should  be 
mentioned ;  and  the  same  is  true  of  an  attic  if  substantially  a  story. 

Benedict  vs.  Ins.  Co.,  i  Daly,  8. 

The  dimensions  of  a  building  materially  affect  the  risk,  whether  it  be 
height  or  ground  area, 'and  whether  in  respect  to  the  main  building  or 
to  wings  ;  concealment  and  misrepresentation  regarding  these  matters 
has  been  treated  as  just  ground  for  forfeiture  by  the  courts.  In  Casey 
vs.  Goldsmid  (2  L.  C.  R.,  200)  the  presence  of  an  adjoining  building 
in  the  nature  of  an  extension  which  was  riot  disclosed  was  deemed,  if 
fraudulent,  sufficient  to  forfeit  the  insurance.  In  Chase  vs.  Ins.  Co.  (20 
N.  Y.,  52)  the  failure  to  disclose  a  kitchen  attached  to  the  main  build- 
ing forfeited  the  policy;  while  in  Perry  Ins.  Co.  vs.  Stewart  (19  Penn, 
St.,  45)  the  conformity  of  such  a  kitchen  to  the  description  was  the 
subject  of  liugation.  In  Pim  vs.  Reed  (6  M.  &  G.,  i)  a  building  was 
described  as  two-story,  and  the  subsequent  addition  of  a  third  story  was 
declared  to  be  an  increase  of  risk  which  worked  a  forfeiture. 

In  like  manner  the  materials  of  which  the  building  is  composed,  the 
nature  of  the  roof,  partitions,  parapet  walls,  and  all  the  more  important 
features  of  the  construction  are  even  more  material  than  mere  size,  and 
misrepresentations  regarding  them  have  been  repeated  grounds  of  for- 
feiture. In  Chase  vs.  Ins.  Co.,  supra,  the  building  was  described  as  a 
' '  stone  dwelling-house, "  while  the  attached  kitchen  was  wood,  and  the 


34 

court  held  that  the  proposition  was  to  insure  a  stone  house,  there  was 
no  contract  regarding  a  building  partly  of  wood.  In  Day  vs.  Ins.  Co. 
(52  Me.,  60)  a  mill  was  described  as  of  certain  dimensions,  and  declared 
to  be  separated  from  other  buildings,  whereas  it  had  an  extension  beyond 
the  main  building,  and  this  defeated  the  policy.  In  Gerhauser  vs.  Ins. 
Co.  (7  Nevada,  174)  a  "brick  building "  proved  to  have  wood  tempo- 
rarily substituted  in  one  of  the  walls,  which  resulted  in  litigation.  So  in 
Woods  vs.  Ins.  Co.  (50  Mo.,  112)  a  building  partly  of  wood  was  de- 
scribed as  brick,  and  the  question  for  the  jury  was  whether  the  fault  lay 
with  the  insured  or  the  agent. 

Defective  Descriptions  in  Policy  Writing  Illustrated. 

The  great  importance  of  accurately  and  correctly  describing  the  in- 
sured subject  justifies  its  special  emphasis.  After  what  has  just  been 
said  there  is,  perhaps,  no  better  way  of  illustrating  what  is,  and  what  is 
not,  an  adequate  description  than  by  ci'.ing  a  few  of  the  cases  which  have 
come  before  the  courts. 

In  Mason  vs.  Ins.  Co.  (12  G.  &  J.,  468)  the  policy  was  on  a  "bark 
now  being  builr."  It  did  not  cover  materials  lying  in  the  ship-yard  ready 
to  be  put  in,  these  were  not  a  component  part  of  the  bark,  and  should 
have  been  specified  if  insurance  was  desired.  In  New  York  Gas  Light 
Co.  vs.  Ins.  Co.  the  policies  were  on  gasometers  and  fixtures  to  be 
placed  in  buildings  of  the  insured's  subscribers.  The  stock  of  gasometers 
and  fixtures,  which  at  the  time  of  insuring  only  amounted  to  $7,000,  was 
afterwards  increased  to  $120,000.  The  failure  to  limit  the  amount  at 
the  time  of  insuring  allowed  the  hazard  to  be  increased  to  seventeen 
times  the  original  amount,  and  converted  it  into  a  huge  blanket  risk.  In 
Moadinger  vs.  Ins.  Co.  (2  Hall,  490)  an  insurance  simply  on  "his  stock- 
in-trade  as  a  baker, "  allowed  recovery  not  only  for  all  the  tools  and  im- 
plements, but  for  a  horse  and  cart  used  in  the  business.  It  should  have 
been  further  described  as  "consisting  of."  In  Crosby  vs.  Ins.  Co.  (5 
Gray,  504)  the  policy  was  "on  their  stock  of  watches,  watch  trimmings, 
etc. , "  and  was  found  to  cover  the  entire  stock  of  plate,  silver  ware,  and 
even  tools.  The  "etc."  proved  an  omnibus  addition  to  the  risk.  In 
White  vs.  Ins.  Co.  (8  Gray,  566)  the  policy  was  on  a  dwelling  and  "wood- 
house."  The  wood-house  proved  to  be  a  joint  wood-house  and  carriage- 
house,  all  under  one  roof  In  Burr  vs.  Ins.  Co.  (16  N.  Y.,  267)  the 
policy  was  on  a  "three  and  a  half  story,  brick  building,  slate  roof,  coped, 
occupied  as  a  cordage  factory,  situated  northwest  corner  of, "  etc.  The 
insured  owned  two  buildings  nearly  alike,  one  on  the  southwest,  the  other 
on  the  northwest  comer,  but  it  was  the  former  that  was  used  as  a  cordage 


35 

factory,  the  latter  was  a  block  factor)' ;  hence,  a  dispute  as  to  which  was 
covered  when  the  fire  came.  In  Liddle  vs.  Ins.  Co.  (43  Bosw,,  179)  the 
insurance  was  on  goods  in  a  "corner  store,"  and  the  policy  was  indorsed  : 
"The  communication  in  the  adjoining  stores  does  not  prejudice  this  in- 
surance. "  The  insured  was  occupying  both  of  the  communicating  stores. 
A  statement  of  the  ground  area  of  the  corner  store  would  have  obviated 
dispute. 

In  Lycoming  Ins.  Co.  vs.  Updegraff  (46  Pa.,  311)  the  insurance  was 
on  goods  in  ' '  new  frame "  wareroom,  to  which  a  brick  extension  was 
afterwards  added,  but  the  qualification  as  to  "  frame  "  saved  the  company 
from  a  loss  in  the  extension.  In  Peoria  Ins.  Co.  vs.  Hall  (12  Mich.,  202) 
the  insurance  by  a  partner,  in  his  individual  name,  without  any  special 
intention  of  benefiting  the  firm,  prevented  him  from  recovering  more  than 
his  own  interest  in  the  property.  In  Burgess  vs.  Ins.  Co.  (10  Allen,  221) 
the  court  made  this  important  distinction  :  A  policy  on  "merchandise,'' 
contained,  etc. ,  will  not  cover  articles  kept  partly  for  use,  but  a  policy  on 
* '  property  "  will  include  both  those  for  sale  and  for  use.  In  Liebenstein 
vs.  Ins.  Co.  (45  111.,  301)  two  policies  were  written,  one  on  stock  in  a 
"chair  factory,"  the  other  on  stock  in  a  "two-story,  frame  building  occu- 
pied as  a  chair  factory. "  In  the  first  the  insurance  was  extended  to  the 
stock  in  a  second  building,  which  was  used  in  connection  with  the  main 
factor)' ;  while  in  the  other  it  was  limited  to  the  single  building  intended 
by  the  company.  ,  In  N.  A.  Ins.  Co.  vs.  Throop  (22  Mich.,  146)  the 
insurance  was  on  stock,  lumber,  and  goods  "in  said  building."  The 
addition  of  the  latter  clause  saved  the  company  from  a  loss  on  lumber 
lying  outside  the  building.  In  Hewitt  vs.  Jns.  Co.  (10  Ins.  Law  Jour., 
375)  the  insurance  was  "on  grain  in  stacks,"  and  was  allowed  to  include 
a  quantity  of  flax  which  had  been  stacked  and  was  unthreshed,  though  the 
court  admitted  that  it  was  doubtful  whether  flax  would  in  all  cases  be  con- 
sidered grain.  The  failure  to  exclude  a  doubtful  item  resulted  in  its  irh- 
clusion.  The  term  grain  should  be  applied  only  to  those  products  pop- 
ularly known  as  such  ;  while  all  others,  such  as  flax,  hay,  and  the  like 
should  be  excepted,  if  necessary,  to  avoid  dispute.  Joel  vs.  Harvey, 
(5  W.  R.,  488)  illustrates  this  :  The  policy  was  on  "stock-in-trade,  con- 
sisting of  corn,  seed,  hay,  straw,  fixtures,  and  utensils,"  and  hops  and 
matting  were  excluded,  though  a  part  of  the  stock. 

In  Pitney  vs.  Ins.  Co.  (4  Ins.  Law  Jour.,  765)  the  policy  insured  P. 
only,  whereas  G.  had  a  part  interest ;  to  correct  the  mistake  and  cover  the 
interest  of  the  latter,  the  agent  indorsed  "loss  payable  one-half  tp  G.  as 
interest  may  appear."  A  more  accurate  statement  setting  forth  that  G.  was 
part  owner,  and  that  the  policy  was  changed  to  insure  the  interest  of 


36 

both  ;  or,  better  still,  a  cancellation  and  a  new  policy  correctly  written, 
might  have  saved  a  lawsuit.  In  Savvyer  vs.  Ins.  Co.  (37  Wis.,  503)  a  part 
of  the  insurance  was  specified  to  be  on  property  in  section  19,  but  there 
was  also  insured  "grain  in  stack  "and  "live-stock  running  at  large." 
The  failure  to  specifically  restrict  these  also  allowed  the  policy  to  cover 
grain  and  live-stock  outside  of  the  section.  The  words  "  held  in  trust" 
have  frequently  proved  an  omnibus  clause  to  the  disadvantage  of  the  in- 
surer. In  Stillwell  vs.  Staples  they  covered  stock  intrusted  for  manufac- 
ture ;  in  Rafel  vs.  Ins.  Co.  they  covered  goods  in  pawn.  The  case  of 
Sherman  vs.  Ins.  Co.  (5  Ins.  Law  Jour.,  285)  illustrates  the  importance 
of  specific  insurance.  Three  companies  insured  on  live-stock,  among 
which  was  at  least  one  very  valuable  animal.  Three  animals  that  were 
lost  were  worth  only  $113  apiece,  but  the  fourth  was  worth  $2,000. 
Two  companies  limited  the  amount  of  their  liability  on  any  one  animal, 
the  other  did  not.  The  liability  of  the  latter  was  in  consequence  double 
that  of  the  others.  The  case  of  Commonwealth  vs.  Ins.  Co.  (112  Mass., 
136)  conversely  illustrates  the  most  faulty  kind  of  blanket  insurance. 
The  policy  was  on  ' '  all  or  either  of  their  freight  buildings, "  of  which  there 
were  several,  and  it  was  held  liable  for  its  full  amount  on  each,  notwith- 
standing they  were  elsewhere  specifically  insured. 

In  Jackson  vs.  Ins.  Co.  (14  Ins.  Law  Jour.,  546)  the  description  of  a 
building  as  "hard-finished,"  when  this  was  true  of  only  one  story,  caused 
the  reinsurer  to  dispute  its  liability.  In  Eggleston  vs.  Ins.  Co.  (14  Ins. 
Law  Jour.,  365)  the  agent  described  the  property  as  in  a  certain  town, 
whereas  it  was  in  an  addition  adjoining  the  town,  and  the  loss  was  dis- 
puted. In  MuUville  vs.  Ins.  Co.  (13  Ins.  Law  Jour.,  435)  a  diagram  of 
the  ground-plan  of  certain  buildings,  furnished  by  the  insured  in  connec- 
tion with  the  application,  was  treated  by  the  agent  as  if  a  complete  dia- 
gram of  the  property,  and  insurance  was  procured  on  a  copy  of  it  made 
by  him.  In  point  of  fact,  it  failed  to  indicate  intervening  structures, 
which  materially  increased  the  risk,  and  the  company  was  compelled  to  be 
-esponsible  for  the  error. 

Location  and  Surroundings  of  the  Risk. 

The  specific  location  of  a  building  or  of  contents  should  be  defined 
as  clearly  as  possible,  both  to  avoid  any  doubt  as  to  the  subject-matter 
and  to  prevent  removal.  Frame  buildings  are  sometimes  moved,  and  the 
insurance  would  otherwise  follow  them  unless  the  risk  were  increased. 

Griswold  vs.  Ins.  Co.,  3  Ins.  Law  Jour.,  254. 

Personal  property  is  essentially  movable  in  its  character.  In  Everett  vs. 
Ins.  Co.  (4  Ins.  Law  Jour. ,  121)  a  threshing-machine  was  described  as 


37 

on  a  certain  section  and  again  as  "stored  in  bam;"  there  was  no  such 
section,  and  it  required  a  lawsuit  to  determine  whether  it  was  covered. 
In  Bowman  vs.  Ins.  Co.  (5  Ins.  Law  Jour.,  9)  grain  was  described  as  in 
"barns"  and  in  "Barn  No.  2  north  from  house ;"  there  was  no  bam 
north  from  the  house,  and  again  a  suit  was  needed  to  determine  the  Ha- 
bility.  In  Sawyer  vs.  Ins.  Co.  (37  Wis.,  503)  insurance  was  on  grain  in 
stack.  The  insured  afterwards  purchased  another  farm  and  by  reason  of 
failure  to  limit  the  location  the  policy  was  held  to  cover  on  the  new  farm 
as  well  as  the  old.  In  Peterson  vs.  Ins.  Co.  (24  Iowa,  494)  horses  were 
insured  with  other  property  "situated"  on  a  described  farm,  and  it  was 
held  that  the  word  was  only  descriptive,  the  horses  were  covered  while 
absent  on  business.  So  in  Noyes  vs.  Ins.  Co.  (15  Ins.  Law  Jour.,  57) 
a  sealskin  dolman  was  insured  as  "contained  in  "a  house,  but  was 
covered  while  absent  for  repairs;  it  was  held  that  the  words  only  meant 
that  the  house  was  the  usual  place  of  deposit.  Both  of  these  were  cases 
where  the  property  might  be  expected  to  be  temporarily  absent  and 
should  have  been  insured  "  only  while  contained  in."  In  Broadwater  vs. 
Ins.  Co.  (15  Ins.  Law  Jour.,  295)  the  property  was  described  as  "their 
buildings  adjoining  and  communicating — situated  detached. "  They  were 
not  in  fact  detached  from  each  other  at  all,  but  as  they  were  detached 
from  others,  the  company  was  held  responsible  for  the  faulty  description 
by  its  agent.  The  buildings,  too,  while  themselves  belonging  to  the  insured 
as  a  post-trader  were  on  government  land,  but  the  fact  that  they  were 
stated  to  be  used  by  a  post-trader  was  allowed  to  override  a  stipulation 
regarding  the  title.  In  Fair  vs.  Ins.  Co.  (4  Ins.  Law  Jour.,  114)  goods 
were  insured  as  "contained  in  the  Hunt  building,  situate  on  Main 
Street  as  per  plan  filed. "  The  plan  exhibited  a  building  divided  into 
three  stores.  The  particular  store  occupied  by  the  insured  was  not 
designated,  and  he  was  consequently  able,  by  knocking  down  the  parti- 
tions, to  cover  goods  in  all  three.  In  Blake  vs.  Ins.  Co.  (12  Gray,  265) 
the  property  was  described  as  in  a  building  known  as  the  car  factory.  A 
hole  less  than  three  feet  square  opened  into  an  adjoining  building  which  was 
used  in  connection  with  the  factory,  and  was  therefore  held  to  be  a  wing. 
The  failure  to  limit  the  description  to  the  main  building  extended  the 
policy  to  the  wing. 

These  are  a  few  of  the  numerous  illustrations  which  can  be  cited  of 
the  consequences  of  imperfect  and  faulty  descriptions  of  location,  and  of 
the  importance  of  such  a  description  as  shall  not  be  open  to  dispute. 

Exposures. 
Adjacent  buildings  when  inquired  about,  should  be  fully  described, 
and  their  distances  noted.     The  proximity  of  such  buildings  is  universally 


38 

recognized  as  increasing  the  danger  from  fire,  and  is  regarded  by  the 
courts  as  a  material  matter  in  which  concealment  will  vitiate  the  insur- 
ance. All  permanent  structures  within  the  specified  distance  should  be 
mentioned  and  their  correct  distance  and  direction  given,  no  matter 
whether  they  are  large  or  small  or  their  uses  are  important  or  otherwise. 
A  failure  to  observe  this  rule  has  repeatedly  caused  a  forfeiture  of  the 
policy.  The  distance  should  be  that  between  the  nearest  parts.  The 
same  holds  true  regarding  a  diagram,  it  must  be  an  accurate  as  well  as 
complete  map  of  the  surroundings. 

Burrett  vs.  Ins.  Co.,  5  Hill,  188  ;  Wright  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  251  ; 
O'Neil  vs.  Ins.  Co.,  Hine  &  Nichols'  Dig.,  82  ;  Chaffee  vs.  Co.,  18  N.  Y.,  376;  Con- 
tinental Ins.  Co.  vs.  Ware,  9  Ins.  Law  Jour.,  519. 

The  subsequent  erection  of  adjacent  buildings  by  other  parties  is  a 
matter  on  which  the  insurer  should  be  informed,  and  if  such  information 
is  called  for  by  the  policy  its  neglect  may  be  fatal.  Where  such  buildings 
are  erected  by  the  insured  or  within  his  control,  the  company  should 
always  be  notified  whether  required  by  the  policy  or  not ;  for,  if  the  risk  is 
thereby  materially  increased,  the  insurance  may  be  forfeited. 

Pottsville  Ins.  Co.  vs.  Horah,  9  Ins.  Law  Jour.,  201  ;  Howard  vs.  Ins.  Co.,  13  B. 
Mon.,  289  ;  Stebbins  vs.  Ins.  Co.,  2  Hall,  632  ;  Calvert  vs.  Ins.  Co.,  i  Allen,  308. 

The  same  doctrine  applies  to  any  essential  modifications  in  the  char- 
acter or  use  of  adjacent  premises  which  are  likely  to  increase  the  risk,  a 
matter  which  will  be  considered  more  at  length  further  on. 

Internal  Appurtenances  and  Arrangements  of  Buildings. 

In  all  special  hazards  great  stress  is  laid  by  underwriters  on  such  inte- 
rior features  and  appurtenances  as  methods  of  heating  and  lighting,  steam 
power,  character  and  location  of  machinery,  force-pumps,  water-supply, 
watchmen,  etc.  Careful  inquiries  are  usually  made  on  these  and  other 
like  points,  and  representations  made  by  the  insured  regarding  them  are 
treated  as  warranties.  The  statements  made,  therefore,  should  be  substan- 
tially correct.  If  any  of  the  inquiries  pertain  to  matters  which  are  sup- 
posed to  be  of  a  permanent  character  the  courts  regard  such  inquiries  as 
continuing  warranties,  that  is,  that  the  conditions  represented  to  exist  shall 
continue  during  the  life  of  the  policy.  In  that  case  any  breach  of  the 
representation,  even  if  made  after  the  insurance  had  been  effected,  would 
result  in  forfeiture.  Especially  is  this  true  of  changes  which  are  likely  to 
increase  the  risk.  Sometimes,  too,  the  application  provides  that  such  rep- 
resentations shall  continue  to  be  true. 

Aurora  Ins.  Co.  vs.  Eddy,  50  111.,  106  ;  Ripley  vs.  Ins.  Co.,  30  N.  Y.,  136  ;  Farm- 
ers'  Ins.  Co.  vs.  Snyder,  16  Wend.,  481  ;  Dale  vs.  Ins.  Co.,  1$  W.  C,  175. 


39 

The  applicant  in  case  of  a  special  hazard  should  understand  that  in 
regard  to  nearly  all  representations  of  this  character,  they  are  looked  on 
by  the  companies  as  expressing  not  simply  the  existing  condition  of  the 
risk,  but  that  which  will  continue  during  the  life  of  the  policy.  As  the 
courts  have  well  said,  they  are  the  inducements  for  taking  the  risk,  and 
payment  has  frequently  been  forfeited  because  the  actual  status  at  the 
time  of  loss  was  different  from  that  represented.  The  introduction  of 
steam  power  into  a  mill  previously  run  by  water ;  the  character  of  the 
machinery;  the  method  of  connecting  the  heating  apparatus  ;  the  nature 
of  that  apparatus  or  its  presence  at  all  ;  the  method  and  time  of  light- 
ing,— all  have  reference  to  the  existence  of  fire  or  of  conditions  likely  to 
incite  combustion  within  the  building.  They  go  far  to  determine  the 
character  of  the  risk,  and  are  properly  regarded  as  material  matters  by 
the  courts. 

In  Daniels  vs.  Ins.  Co.  (lO  Ins.  Law  Jour.,  658)  fires  or  lights  were 
prohibited  in  a  business  where  naphtha  was  employed,  and  the  court  de- 
clared that  the  use  of  a  small  stove  for  heating  the  naphtha  was  an 
increase  of  risk  which  forfeited  the  insurance.  In  Murdock  vs.  Ins.  Co. 
(2  N.  Y.,  210)  the  applicant  represented  that  a  chimney  would  be  built 
for  the  stovepipe,  which  passed  through  a  window.  Instead  of  doing  so, 
the  stove  was  moved  and  the  pipe  passed  through  a  stone  placed  on  the 
roof,  and  the  policy  was  avoided.  In  Glen  vs.  Lewis  (8  W.  H.  &  G. ,  6oj) 
the  temporary  introduction  of  a  steam-engine  merely  for  trial  in  the  face 
of  a  policy  prohibition  avoided  the  insurance,  and  in  Robinson  vs.  Ins. 
.Co.  (3  Dutch,  134)  the  policy  was  defeated  by  subsequently  locating  a 
steam-engine  in  a  building  adjoining,  which  increased  the  risk,  though  no 
express  prohibition  was  involved.  Again,  in  Diehl  vs.  Ins.  Co.  (58  Pa. 
St.,  443),  the  insurance  was  on  a  '* tannery  without  steam"  in  which  this 
was  one  of  the  clauses  in  the  policy,  and  it  was  defeated  by  the  subse- 
quent addition  of  steam,  regardless  of  any  increase  of  risk.  In  Atkins 
vs.  Ins.  Co.  (8  Ins.  Law  Jour.,  78)  the  risk  was  a  saw-mill,  but  the  fail- 
ure of  the  applicant  to  state  the  presence  of  a  planing-machine  forfeited 
the  policy.  So  in  53  Texas,  61,  the  presence  of  a  cotton-gin  in  a  fac- 
tory was  adjudged  fatal. 

Force-pumps,  Water-supply,  and  Watchmen. 

Of  equal  importance  with  those  last  referred  to  are  such  inquiries  as 
relate  to  the  means  of  extinguishing  and  preventing  fires.  Represen- 
tations regarding  the  presence  of  watchmen,  lo  ce-pumps,  stand-pipes, 
tanks,  and  the  like  are  looked  on  by  the  companies  and  generally  by  the 
courts  as  continuing  warranties.     Payments  have  been  refused  because 


the  representions  made  regarding  them  have  been  found  to  be  untrue  at 
the  time  of  loss.  Inquiries  about  them  should  not  be  limited  to  their 
existence,  but  should  extend  to  their  efficiency.  The  company  expects 
that  a  pump  will  be  kept  in  order,  that  tanks  will  be  filled,  and  that 
watchmen  will  not  consist  simply  of  periodical  visitors,  but  of  men  on 
duty  on  the  premises  at  the  proper  hours.  Failure  in  these  respects 
has  involved  litigations.  Not  only  the  application  but  frequently  the 
policy  contains  stipulations  regarding  these  precautionary  measures,  with 
which  the  insured  is  bound  to  comply.  A  policy  on  a  quartz-mill  pro- 
vided that  a  watchman  should  be  employed  to  guard  the  premises  when 
idle.  The  so-called  watchman  proved  to  be  a  miner  who  was  working 
nearly  half  a  mile  away  during  the  day,  and  slept  in  a  house  nine  hundred 
feet  distant  at  night!  The  court  held  in  Wenzel  vs.  Ins.  Co.  (14  Ins. 
Law  Jour.,  809)  that  this  was  not  a  compliance.  Trojan  Company  vs. 
Ins.  Co.  (14  Ins.  Law  Jour.,  625)  was  a  similar  case.  The  stipulation 
was  that  the  watchman  should  be  upon  the  premises  night  and  day.  In 
point  of  fact  he  slept  in  a  house  a  hundred  feet  distant,  and  kept  a  rep- 
resentative in  the  shape  of  a  watch-dog  in  the  building.  The  court  held 
that  this  was  no  compliance.  So  in  Blumer  vs.  Ins.  Co.  (7  Ins.  Law 
Jour.,  833,  and  9  Ins.  Law  Jour.,  444)  the  court  declared  in  both  cases 
that  a  representation  that  one  or  two  hands  slept  in  the  mill  was  a  con- 
tinuing warranty,  and  their  absence  forfeited  the  policy.  In  Miller  vs. 
Ins.  Co.  (6  Ins.  Law  Jour.,  873)  the  insured,  in  response  to  a  question 
whether  it  was  in  charge  of  some  person  on  the  premises,  replied,  '  *  There 
is  a  man  on  the  premises  ;"  this  was  adjudged  a  continuing  warranty. 
The  case  of  Albion  Lead  Works  vs.  Ins.  Co.  (9  Ins.  Law  Jour.,  435)  is 
instructive.  Instead  of  a  written  application,  insurance  was  made  on  a 
mill  property  on  an  old  description  which  included  a  watchman  and  the 
oral  representation  of  a  broker  that  there  was  a  force-pump  in  working 
order.  There  was  no  watchman,  and  the  pump  was  out  of  order.  The 
court  held  that  if  they  had  been  written  representations  of  an  existing  con- 
dition they  would  have  been  continuing  warranties.  Because  they  were 
not  the  company  had  to  pay  the  loss.  In  Sayles  vs.  Ins.  Co.  (2  Curt., 
612)  a  warranty  regarding  force-pumps  ready  for  use  was  held  to  include 
a  warranty  of  power  to  work  them,  and  in  Gloucester  Co.  vs.  Ins.  Co. 
(5  Gray,  497)  a  similar  representation  regarding  water-tanks  was  held  to 
imply  that  they  should  be  well  filled  from  the  time  the  building,  which 
was  unfinished,  was  completed. 

The  conclusion  from  these  cases  is  that  statements  regarding  these 
various  appurtenances  of  building  risks  should  embody  no  essentially 
false  or  evasive  representations  ;  they  should  show  not  simply  what  is  the 
subsisting,  but  what  will  be  the  continuing  condition  of  the  risk. 


41 

Use  or  Occupation  of  the  Premises. 

Closely  allied  with  those  features  of  the  risk  just  referred  to,  is  the  use 
to  which  the  insured  premises  may  be  put.  A  building  is  insured  as 
a  dwelling,  or  store,  or  factory  in  the  expectation  that  it  will  continue  to 
be  used  for  that  purpose.  The  use  to  which  the  premises  are  put  is,  as 
we  have  seen,  a  material  feature  in  the  description  of  the  property,  and  a 
designation  which  is  misleading,  such  as  describing  a  building  used  in 
part  for  a  stable  as  a  dwelling,  or  a  saloon  as  a  hotel,  will  frequently  forfeit 
the  insurance.  This  is  equally  true  whether  the  policy  is  on  the  building 
itself  or  the  contents.  A  subsequent  change  in  the  use  of  a  building 
will  not  always  have  this  effect;  but  if  it  is  forbidden  by  the  policy,  or 
materially  increases  the  risk,  or  so  radically  alters  its  character  that  it 
becomes  substantially  an  altogether  different  subject  of  insurance,  the 
policy  will  no  longer  apply. 

Fire  Ass'n  vs.  Williamson,  26  Penn.  St.,  196;  Hobby  vs.  Dana,  17  Barb.,  Ill; 
Howell  vs.  Bait.  Soc,  16  Md.,  377  ;  Appleby  vs.  Ins.  Co.,  45  Barb.,  454. 

Since  nearly  all  policies  contain  provisions  against  increase  of  risk,  and 
frequently  prohibit  explicitly  the  existence  of  certain  classes  of  hazards, 
any  material  change  in  the  occupation  of  the  property,  whether  in  whole 
or  in  part,  may  be  dangerous  to  the  insured,  and  the  company  should 
be  informed.  Where  there  is  reason  to  apprehend  that  such  a  change 
may  be  made  the  policy  should  be  written  "only  to  be  used  as,"  etc.; 
for,  unless  there  is  a  distinct  prohibition  or  a  manifest  increase  in  the 
risk,  the  courts  are  disposed  to  grant  to  the  insured  the  largest  license  in 
the  use  of  the  premises  consistent  with  the  contract,  and  it  is  difl&cult  for 
the  company  in  many  instances  to  satisfy  a  jury  that  the  risk  has  been 
altered  to  its  detriment.  Thus  in  Richards  vs.  Ins.  Co.  (15  Ins.  Law 
Jour.,  598)  premises  improperly  described  as  used  for  residence  and 
stores  were  in  part  used  for  a  restaurant  and  bakery,  to  which  a  brick  oven 
was  also  attached.  These  facts,  from  an  insurance  standpoint,  essentially 
altered  the  character  of  the  risk,  but  they  were  regarded  by  the  court  in 
this  instance  rather  as  minor  features  in  an  imperfect  general  description, 
for  which  the  agent  was  at  fault.  In  contrast  with  this  case,  however, 
may  be  cited  that  of  Fire  Association  vs.  Williamson,  ante,  where  three  ad- 
joining buildings  were  insured  under  one  policy,  one  of  which  was  at  the 
time  occupied  as  a  shoe  store  ;  but  it  was  afterwards,  without  the  knowl- 
edge of  the  company,  changed  to  a  grocery.  The  policy  required  grocery 
stores  to  be  specified,,  and  a  higher  rate  was  charged  for  them.  The  court 
ruled  that  the  change  of  occupation  vitiated  the  insurance  as  to  all  of  the 
buildings. 


42 

Particularly  in  the  case  of  special  hazards  are  minute  inquiries  addressed 
to  the  insured  in  the  application,  not  simply  as  to  the  general  occupancy 
of  the  premises,  but  in  regard  to  such  details  as  the  presence  of  planers, 
the  disposition  of  shavings,  the  use  of  paints  and  varnishes  ;  in  case  of 
saw-mills,  whether  custom  or  lumber  work  is  done  ;  whether  it  is  also  a 
lath  and  shingle  mill ;  in  case  of  breweries,  regarding  malt-kilns  and 
stills ;  or  in  case  of  pork-houses,  regarding  slaughtering,  rendering,  and 
cutting ;  and  so  of  other  classes  of  risks.  All  such  detailed  inquiries  are 
material  in  their  character  and  must  be  truly  answered ;  and  where,  as  is 
often  the  case,  the  insured  covenants  against  a  subsequent  increase  of  risk, 
any  serious  change  subsequently  introduced  may  jeopardize  his  policy. 
Thus,  in  People's  Ins.  Co.  vs.  Spencer  (53  Penn.  St.,  353)  the  subject  of 
insurance  was  a  brewery,  to  which  the  work  of  distilling  was  subsequently 
added,  and  it  was  held  to  be  a  fatal  increase  of  risk.  So  in  Hervey  vs. 
Ins.  Co.  (11  U.  C.  C.  P.,  394)  a  printing-office  was  subsequently  added 
to  a  store  risk  without  notifying  the  company,  and  the  insurance  was  de- 
feated. In  Mayor  vs.  Ins.  Co.  (9  Bosw.,  424)  the  court  declared,  that  if 
buildings  erected  for  exhibition  purposes,  and  insured  as  such,  were  after- 
wards used  for  other  purposes,  it  would  be  fatal.  In  Washington  Co. 
Ins.  Co.  vs.  Ins.  Co.  ( 5  Ohio  St.,  4  50)  the  court  declared  that  the  under- 
writer insuring  a  mechanical  establishment  is  presumed  to  insure  only 
against  risks  arising  from  the  usual  and  appropriate  mode  of  carrying  on 
such  business  ;  the  introduction  of  a  new  and  unusual  invention  without 
the  company's  consent  may,  by  increasing  the  risk,  avoid  the  policy.  In 
Cole  vs.  Ins.  Co.  (14  Ins.  Law  Jour.,  453)  the  court  declared  that  the 
addition  of  a  drying-house  in  close  proximity  to  a  planing-mill  was  a  self- 
evident  increase  of  risk,  which  barred  recovery.  In  German-American 
Ins.  Co.  vs.  Steiger(i3  Ins.  Law  Jour.,  487)  it  was  held  that  the  substitu- 
tion of  a  fire  for  a  steam  drier  presented  a  question  for  the  jury  whether 
the  risk  had  thereby  been  increased.  In  nearly  all  cases  of  special  haz- 
ards the  survey  is  made  part  of  the  policy,  and  the  universal  rule  of  the 
courts  in  that  case  is  that  those  matters  regarding  which  questions  are 
asked  are  thereby  made  warranties,  and  a  substantial  breach  will  forfeit 
the  insurance. 

Le  Roy  vs.  Ins.  Co.,  39  N.  Y.,  90  ;  Cox  vs.  Ins.  Co.,  29  Ind.,  586  ;  Le  Roy  vs. 
Ins.  Co.,  6  Hand.,  80. 

The  agent  should  see  to  it,  not  only  that  the  answers  are  correctly  given 
by  the  insured,  but  that  all  the  questions  are  answered  as  far  as  possible, 
for  the  omission  of  an.swers  may  leave  the  insured  at  liberty  to  alter  the 
character  of  the  risk  in  those  respects  to  any  extent  which  is  not  an  obvi- 
ous increase  of  hazard. 

Lcrillard  Ins.  Co.  vs.  McCuUoch,  21  O.  St.,  176. 


43 

Specific  Titles   or   Interests, 
ownership. 

The  principal  interest  in  property,  and  that  which  should  be  insured 
in  preference  to  any  other,  is  ownership,  by  which  the  companies  usually 
understand  the  strictly  legal  title,  with  the  right  to  control  and  dis- 
pose of  the  property.  This  interest  is  generally  designated  in  the 
application  and  policy  by  the  word  "his  "or  "  owner."  These  words, 
however,  should  never  be  used  without  proper  qualification,  unless  the 
insured  has  the  legal  title  and  right  of  disposal  for  his  own  benefit.  For 
in  law  they  are  frequently  allowed  to  support  any  loose  claim  where  the 
insured  might  regard  himself  as  the  owner  in  a  popular  sense,  and  where 
his  interest  is  much  less  than  that  of  an  actual  title  in  fee.  Thus,  a  man 
has  been  allowed  to  designate  as  "his,"  buildings  on  leased  ground  or 
belonging  to  his  wife,  and  to  call  himself  the  "owner"  of  property  which 
he  had  only  contracted  to  purchase,  or  to  which  his  tide  was  at  best  but 
an  equitable  one.  In  repeated  instances  the  companies  have  thus  been 
led  to  believe  that  they  were  insuring  an  absolute  and  unqualified  owner- 
ship, whereas  events  proved  that  the  interest  was  qualified  in  its  character. 

Hough  vs.  Ins.  Co.,  29  Conn.,  10;  Pierce  vs.  Ins.  Co.,  62  Barb.,  636. 

■  To  guard  against  this,  the  policy  usually  stipulates  that  the  precise 
nature  of  the  tide,  if  qualified,  shall  be  stated  ;  and  then  a  failure  to  do 
so,  unless  the  agent  is  in  fault,  will  vitiate  the  insurance. 

Porter  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  928  ;  ./Etna  Ins.  Co.  vs.  Rash,  8  Ins.  Law 
Jour.,  271  ;  Murphry  vs.  Ins.  Co.,  5  Ins.  Law  Jour.,  297. 

The  ordinary  provision  is  that  if  the  interest  be  other  than  the  ' '  entire 
and  unconditional  ownership"  or  "absolute  and  sole  ownership  for  the 
use  and  benefit  of  the  insured,"  it  must  be  so  stated.  To  meet  such 
requirements,  the  estate  should  be  vested  in  fee-simple,  with  an  absolute 
power  of  disposal,  not  simply  for  a  term  of  years,  or  for  life,  or  under 
certain  circumstances ;  it  should  belong  solely  to  the  party  and  for  his 
own  benefit  If  no  tide-deed  has  passed,  there  should  be  at  least  an  un- 
disputed right  to  compel  it.  There  may  be  mortgages  and  liens  upon 
the  property,  provided  they  are  mere  liens  that  do  not  affect  the  title  or 
right  of  possession.  But  these  should  be  separately  noted,  for  here  again 
the  policy  usually  provides  that  failure  in  this  respect  will  result  in  for- 
feiture. 

It  occasionally  happens  that  while  the  insured  is  the  unqualified  owner 
of  the  building,  his  ownership  of  the  land  on  which  it  stands  is  qualified 
or  the  title  is  in  another.  Where  the  language  of  the  contract  clearly 
includes  both  land  and  building,  as  it  usually  does,  a  failure  to  state  the 


44 

qualified  interest  will  be  fatal ;  and  in  all  cases  such  qualified  interest  in 
the  land  should  be  stated,  both  to  avoid  dispute  and  because  buildings 
standing  upon  the  land  of  another  are  actually  less  valuable  to  the 
owner.  They  are  liable  to  removal  at  the  expiration  of  a  lease,  and  are  a 
temptation  to  fraudulent  insurance. 

Washington  Mills  Co.  vs.  Ins.  Co.,  13  Ins,  Law  Jour.,  225,  and  cases  there  cited. 

In  all  other  cases  where  the  ownership  is  not  of  the  absolute  character 
described  above,  it  should  be  treated  as  qualified  and  its  precise  nature 
stated.  In  no  case  should  mortgages  or  mere  incumbrances  of  any  kind 
be  treated  as  ownership.  Ordinary  tenancies  do  not  conflict  with  the 
absolute  ownership  of  the  landlord,  but  life-tenancies  and  other  freehold 
interests  do  conflict  with  the  absolute  title  of  the  reversioner  or  remainder- 
man. Possession  and  control  by  other  parties  than  the  insured  should 
always  be  noted.  In  Wenzel  vs.  Ins.  Co.  (14  Ins.  Law  Jour.,  809)  the 
leasing  and  surrendering  control  to  other  parties  was  declared  to  be  a 
change  of  possession  within  the  meaning  of  the  policy. 

See  Woody  vs.  Ins.  Co.,  9  Ins.  Law  Jour.,  276  ;  Cheek  vs.  Ins.  Co.,  supra  ;  Davisvs. 
Ins.  Co.,  15  Ins.  Law  Jour.,  533  ;  Clay  Ins.  Co.  vs.  Mfg.  Co.,  4  Ins.  Law  Jour.,  858; 
Porter  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  928  ;  Lycoming  Ins.  Co.  vs.  Haven,  7  Ins.  Law 
Jour.,  449. 

Property  belonging  to  the  wife  should  be  insured  as  hers,  not  as  her 
husband's. 

Hunt  vs.  Ins.  Co.,  14  Ins.  Law  Jour.,  298  ;  Agricultural  Ins.  Co.  vs.  Montague,  7 
Ins.  Law  Jour.,  708. 

Part-owners  should  be  allowed  to  insure  only  to  the  extent  of  their 
interest,  unless  authorized  to  insure  for  the  remaining  owners  and  in  the 
name  of  all.     Partners  are  thus  authorized  if  their  intention  to  do  so 
clearly  appears. 
>Peoria  Ins.  Co.  vs.  Hall,  12  Mich.,  202. 

As  a  matter  of  good  practice,  an  agent  should  decline  all  risks  where 
the  ownership  is  doubtful,  or  mixed,  or  otherwise  unsatisfactory.  It  is 
a  great  deal  better  to  avoid  possible  difficulty  than  to  go  in  carelessly 
and  get  out  skillfully.  The  following  points  are  given,  however,  so  that 
the  agent  may  understand  the  legal  conditions  of  each  class  of  cases  and 
be  intelligent  in  his  declinations  as  well  as  in  his  acceptances. 

In  the  case  of  buildings  and  real  estate  there  is  not  often  any  question 
as  to  what  will  constitute  a  legal  ownership.  But  with  personal  prop- 
erty it  is  different.  Here  the  actual  possession  of  the  goods  or  chattels 
is  likely  to  seriously  affect  the  property  rights,  and  the  title  to  goods  in 
the  possession  or  control  of  one  party  which  are  claimed  by  another 


45- 

should  be  closely  scrutinized.  In  many  of  the  States  it  is  an  established 
rule  that  the  legal  title  to  personal  property  which  has  been  mortgaged, 
especially  if  placed  within  the  control  of  the  mortgagee,  vests  in  the 
latter. 

Appleton  Iron  Co.  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  177 ;  Kronk  vs.  Ins.  Co.,  9  Ins. 
^wjour.,  26. 

In  case  of  ordinary  sales  of  personal  property  where  the  purchaser  has 
not  yet  come  into  possession,  if  it  be  a  specific  article,  as  a  horse,  the 
latter  is  the  owner ;  but  if  it  be  an  undefined  portion  of  a  lot  of  goods,  as 
a  hundred  bushels  of  corn  from  a  granary,  or  if  anything  remains  to  be 
done  to  complete  the  sale,  the  title  remains  with  the  seller  until  the 
specific  amount  has  been  set  aside  and  accepted  by  the  purchaser,  or  ih^^^ 
act  omitted  has  been  done. 

Merchants'  Bank  vs.  Bangs,  102  Mass.,  295  ;  Haley  vs.  Ins.  Co.,  120  Mass.  292  ; 
Suffolk  Ins.  Co.  vs.  Boyden,  9  Allen,  123. 

In  the  same  way,  articles  that  have  been  ordered  and  are  in  process  of 
construction  remain  the  property  of  the  maker  until  delivered  or  ac- 
cepted ;  and  a  building  in  process  of  erection  under  contract  will  remain 
at  the  risk  of  the  builder  until  accepted  by  the  owner, 

Filden  vs.  Besley,  9  Ins.  Law  Jour.,  241  ;  Commerciallns.  Co.  vs.  Ins.  Co.,  16 
Ins.  Law  Jour.,  81. 

The  further  fact  that  a  party  in  possession  of  personal  property  under 
circumstances  which  will  justify  a  belief  in  his  ownership  can  wrongfully 
pass  a  title  to  innocent  purchasers,  again  enhances  the  risk  of  insurance 
in  such  cases.  What  are  known  as  fixtures  often  give  rise  to  embar- 
rassing questions  of  ownership,  which  will  be  considered  hereafter.  The 
questions  of  possession  and  control,  therefore,  become  important  matters 
for  consideration  in  all  insurances  on  personal  property.  Where  the 
character  of  the  interest  cannot  be  satisfactorily  determined,  it  is  better 
to  insure  the  owner  of  the  property,  briefly  stating  the  facts,  with  loss 
payable  to  John  Doe,  the  party  wanting  protection,  "as  interest  shall 
appear. " 

To  meet  the  delicate  questions  regarding  ownership  of  goods  which 
have  been  bargained  for  but  still  remain  in  the  hands  of  the  seller,  two 
phrases  are  in  common  use  among  underwriters :  ' '  Sold  but  not  re- 
moved," and  "sold  but  not  delivered,"  The  first  applies  to  goods  the 
title  to  which  has  actually  passed  to  the  purchaser.  The  second  applies 
to  those  where  the  title  still  remains  with  the  seller,  and  is  not  really 
needed  at  all  in  most  cases,  since  the  policy  already  covers  all  goods 
while  they  remain  his  property.     It  is  the  policy  of  the  companies  to 


46 

limit  their  protection  as  far  as  possible  to  the  party  or  parties  named  in 
the  contract,  and  to  discourage  the  insertion  of  either  clause  when  not 
actually  required. 

Waring  vs.  Ins.  Co.,  i  Ins.  Law  Jour.,  672. 

Qualified  and  Limited  Estates. 

Interests  in  property  other  than  that  of  absolute  and  unqualified  legal 
ownership  should  generally  be  insured  simply  as  "his  interest,"  stating 
its  character  ;  or,  if  the  applicant  has  no  actual  interest  of  his  own  which 
will  authorize  him  to  receive  the  money,  but  is  simply  acting  as  the  rep- 
resentative or  agent  of  those  who  would  be  entitled  to  receive  it,  the 
insurance  should  be  directly  on  the  interest  of  the  latter  or  for  their 
benefit. 

Martin  vs.  Ins.  Co.,  15  Ins.  Law  Jour.,  371. 

Prominent  among  such  interests  are  lite-estates,  including  the  dower 
rights  of  widows  when  limited  to  life,  which  are  often  erroneously  de- 
scribed as  ownerships,  but  which  are  in  reality  mere  tenancies  lasting 
during  life.  It  is  plain  that  the  interest  of  such  parties  must  generally 
be  less  than  the  actual  value  of  the  property,  depending  upon  the  age 
of  the  tenant,  and  is  usually  computed  by  multiplying  the  net  rental 
value  by  the  expectency  of  life  at  the  given  age  as  shown  by  a  mortality 
table,  but  this  will  give  an  exaggerated  value  unless  the  tenant  be  of 
advanced  age.  Life-tenants  are  often  invested  with  the  duty  of  caring  for 
and  keeping  the  property  insured.  But  in  such  case  they  are  acting  for 
the  reversioners  as  well  as  themselves,  and  the  insurance  should  be  for  the 
benefit  of  themselves  and  the  reversioners.  Whoever  has  the  charge  of 
such  property  is  the  proper  party  to  effect  the  insurance,  which  should  be 
for  the  benefit  of  all  rather  than  a  particular  interest  when  this  can  be 
done.  Thus,  if  the  property  is  that  of  an  estate,  it  may  be  insured  for 
the  benefit  of  the  estate ;  or,  what  is  better,  for  the  benefit  of  the  life-tenant 
and  heirs  or  devisees. 

Clinton  vs.  Ins.  Co.,  i  Ins.  Law  Jour.,  436  ;  Clinton  vs.  Ins.  Co.,  51  Barb.,  647. 

The  great  objection  to  all  separate  insurances  of  minor  or  partial 
interests  is  that  different  parties  may  thus  independently  insure  the  prop- 
erty for  several  times  its  value,  and  not  only  is  a  temptation  furnished  to 
fraud,  but  the  question  of  adjustment  becomes  an  embarrassing  one  for 
the  companies.  It  is  well,  however,  for  the  agent  to  understand  that  the 
companies  have  a  short-cut  to  justice  through  the  replacement  or  rebuild- 
ing clause,  and  when  a  case  of  multiplied  overinsurances  is  up  for  dis- 
cussion, and  the  question  is  asked,  ",What  would  the  companies  do  in 


47 

case  of  the  burning  of  property  so  overinsured  ?"  the  prompt  and  ready 
answer  would  be,  "They  would  replace  the  property." 

But,  of  course,  there  are  many  instances  where  such  limited  insurance 
is  required,  and  the  agent  should  be  familiar  with  the  rights  of  the  parties. 
The  interest  of  the  reversioner,  like  that  of  the  life-tenant,  may  be  the 
subject  of  insurance,  and  the  value  of  such  an  interest  is  the  reverse  of 
the  other.  It  is  the  present  worth  of  the  sum  which  the  building  or 
other  property,  in  view  of  its  depreciation,  would  be  valued  at  at  the  end 
of  the  probable  life  of  the  tenant.  Unless  the  latter  is  an  elderly  person, 
such  an  interest  is  usually  very  small,  and  hardly  a  fit  subject  for  separate 
insurance.  This  class  of  risks  is  to  be  avoided  unless  special  authority  is 
obtained  from  the  company.  So  also  in  regard  to  all  the  partial  interests 
and  other  complicated  or  intangible  insurable  interests  herein  treated. 
The  mere  fact  that  a  man  has  a  legal  right  to  obtain  insurance  does  not 
by  any  means  constitute  him  a  desirable  customer. 

Ordinary  tenancies  for  a  term  of  years  and  all  leasehold  interests 
create  insurable  interests  ;  but  only  where  the  tenant  is  liable  to  pay 
rent  after  a  destruction  by  fire,  or  the  rent  is  paid  in  advance,  or  where  the 
actual  value  of  the  use  through  improvements  made  by  himself  is  in 
excess  of  the  rental,  and  his  insurable  interest  is  only  such  liability  or 
excess.  Except  where  buildings  have  been  erected  by  the  lessee,  or  he 
is  bound  to  replace,  this  interest  is  of  such  a  vague  character  that  it 
should  seldom  be  covered.  In  any  case  the  specific  character  of  the 
interest  covered  should  be  carefully  defined,  otherwise  injuries  which 
are  merely  consequential  in  their  character  are  likely  to  be  included. 

Niblo  vs.  Ins.  Co.,  i  Sandf.,  551  ;  Mayor  vs.  Ins.  Co.,  10  Bos.,  537  ;  Cushman  vs. 
Ins.  Co.,  34  Me.,  487  ;  Imp.  F.  Ins.  Co.  vs.  Murray,  73  Penn.  St.,  13. 

In  the  same  way,  rentals  might  be  insured  by  landlords,  and  such 
intangible  interests  as  expected  incomes  and  profits,  or  consequential  dam- 
ages resulting  from  business  injuries,  or  expenses  on  account  of  fire,  are 
allowed  by  the  law  to  be  insured.  But  such  risks  are  not  included 
■under  ordinary  policies  on  the  property ;  they  must  be  specifically  slated 
if  insured  at  all,  and  it  is  a  well-established  principle  in  fire  underwriting 
that  the  insurance  of  consequential  injuries  is  in  the  highest  degree 
unsatisfactory  in  its  workings  and  results,  and  except  in  rare  cases  should 
be  refused. 

Niblo  vs.  Ins.  Co.,  i  Sandf.,  551;  Leonards  vs.  Ins.  Co.,  2  Rob.,  131. 

Trusteeships. 

Trustees  of  various  kinds,  who  have  been  intrusted  with  tne  control  of 
property  belonging   to    others,  constitute  a  numerous  class,  who  are 


48  ' 

recognized  in  law  as  having  qualified  titles  or  interests  which  they  may 
insure.  Such  are  warehousemen,  commission  merchants,  executors  and 
administrators,  and,  in  short,  all  parties  having  the  custody  of  such  prop- 
erty. But  the  general  doctrine  is  that,  except  in  the  case  of  common 
carriers,  trustees  are  not  liable  for  losses  by  fire  unless  by  some  stipula- 
tion or  special  responsibility  imposed  on  them,  or  in  cases  of  negligence, 
and  insurance  by  them  may  be  said  to  be  voluntary. 
Rice  vs.  Nixon,  14  Ins.  Law  Jour.,  329. 

This  is  the  ordinary  rule  regarding  goods  consigned  to  the  possession 
of  others  for  various  purposes.  But  there  are  cases,  such  as  that  of  a ' 
trustee  having  the  care  of  an  estate,  where  insurance  may  be  obligatory.  • 
This  question  of  responsibility  on  the  part  of  the  trustee  is  an  important 
one  for  the  agent  to  consider.  In  some  policies  the  responsibility  in 
the  case  of  goods  held  in  trust  has  been  expressly  limited  by  the  words 
"for  which  he  is  responsible,"  and  in  such  case  no  others  will  be  in- 
cluded. These  or  similar  words  should  always  be  used  where  it  is 
desired  to  limit  the  insurance  to  the  personal  responsibilit}'  of  a  trustee, 

N.  Brit.  &  Mer.  Ins.  Co.  vs.  Moffat,  L.  R.,  7  C.  B.,  25. 

Sometimes,  too,  the  trustee  is  interested  by  reason  of  liens  or  advances 
made  on  consignments  of  goods,  and  this  would  be  properly  expressed 
by  ' '  his  interest "  in  the  goods. 
Parks  vs.  Assurance  Co.,  5  Pick.,  34. 

Above  all,  it  is  important  to  know  just  what  constitutes  a  trusteeship  in 
goods  as  distinguished  from  an  ordinary  ownership.  About  the  best  test 
is  the  right  of  the  consignor  to  compel  a  return  to  him  of  the  specific 
goods  in  the  hands  of  another.  If  this  right  exists,  they  are  held  by  the 
latter  in  trust ;  but  if  he  is  only  obligated  to  account  for  their  moneyed 
value,  the  consignee  is  an  owner,  not  a  trustee.  In  the  latter  case  all 
such  goods  are  covered  by  an  insurance  of  the  consignee  as  owner,  in 
the  former  they  are  only  covered  by  such  words  as  "intrust,"  or  "on 
commission." 

Rice  vs.  Nixon,  ante. 

The  most  familiar  illustration  of  this  distinction,  and  one  which  has 
occasioned  the  most  litigation,  is  that  of  grain  in  warehouses.  Sometimes 
the  grain  is  delivered  purely  for  purposes  of  storage,  but  to  avoid  the 
difiiculty  of  keeping  each  specific  lot  separate  it  is"  understood  that  the 
lots  may  be  mingled,  but  that  the  consignor  is  to  reclaim  an  equal 
quantity  of  the  same  grade.  This  is  a  mere  trusteeship,  or  bailment,  as 
it  is  called,  on  the  part  of  the  warehouseman ;  the  sender  of  the  goods 


49 

remains  the  owner  and  is  liable  in  case  of  their  destruction.  Sometimes 
the  warehouseman  takes  the  grain  on  his  own  responsibility,  agreeing  to 
return  a  moneyed  or  some  other  equivalent  This  is  a  sale,  and  the 
warehouseman  is  the  owner.  Often,  too,  it  becomes  difficult  to  deter- 
mine whether  the  parties  intended  a  sale  or  a  bailment  by  their  agreement ; 
and  then  the  courts  will  inquire  into  their  intentions  and  the  usages  of 
the  business. 

Rice  vs.  Nixon,  anie,  and  cases  there  cited. 

Where  goods  on  storage  are  insured  by  the  owner,  they  should  be 
insured  as  "on  storage  ;"  otherwise  the  policy  may  not  always  attach,  on 
account  of  an  exempting  clause. 

In  all  cases  of  alleged  trusteeships  the  relation  of  the  trustee  to  the 
property  should  be  such  as  will  justify  an  insurance.  Thus  a  party  who 
was  simply  renting  separate  rooms  for  storage  purposes  to  various  parties, 
and  surrendering  control  of  the  rooms  to  them,  would  have  no  trust  that 
would  justify  an  insurance  of  goods  stored,  unless  he  had  agreed  to  be 
responsible  for  their  loss.  Executors  and  administrators  should  never  be 
allowed  to  insure  in  their  own  names  the  real  estate  of  the  deceased, 
unless  by  the  will  or  by  the  law  they  are  intrusted  with  its  care,  and  then 
the  insurance  should  be  for  the  benefit  of  the  heirs  or  devisees.  Some- 
times it  is  willed  to  them  in  trust,  then  they  may  properly  insure  as 
"trustees"  or  "owners  in  trust ;"  but  the  executor  or  administrator  is  in 
law  the  owner  of  the  personalty  belonging  to  an  unsettled  estate,  and  is 
the  proper  party  to  insure  it  as  "  executor. " 

Common  carriers,  such  as  railroad  and  express  companies,  form  a  pe- 
culiar class  of  trustees.  The  law  holds  them  liable  for  any  damage  to 
property  in  their  care  unless  it  occurs  through  an  act  of  God.  They 
may  limit  this  liability  by  a  special  agreement  exempting  losses  that  were 
unavoidable,  but  they  cannot  escape  the  consequence  of  such  as  are  due 
to  their  own  negligence. 

Germania  Ins.  Co.  vs.  R.  R.  Co.,  7  Ins.  Law  Jour.,  547  ;  Steinway  vs.  R,  R.  Co., 
43  N.  Y.,  126;  Prov. -Washington  Ins.  Co.  vs.  The  Sidney,  14  Ins.  Law  Jour.,  382. 

Carriers,  therefore,  have  an  insurable  interest  in  all  property  in  their 
charge.  But  since  their  liability  may  be  restricted  by  special  contract, 
such  risks  should  be  limited  to  property  "for  which  they  may  be  liable 
as  carrier."  Another  reason  why  this  limitation  should  be  enforced,  is 
that  goods  in  transit  are  frequently  stored  or  warehoused  with  such  car- 
riers. If  this  warehousing  is  a  mere  incident  in  their  transportation,  it 
is  still  a  carrier's  risk.  But  if  done,  for  instance,  at  the  end  of  the  route 
for  the  accommodation  of  the  shipper  when  the  carrier's  duty  is  ended. 


so 

it  is  a  mere  warehouse  risk  for  which  the  carrier  is  not  liable,  but  which 
would  be  covered  by  a  simple  policy  on  property  "in  trust."  For  the 
same  reason  precautions  should  be  observed  in  warehouse  risks  that  are 
connected  with  any  general  transportation  system. 

The  insurance  of  goods  by  owners  or  shippers  while  in  the  care  of 
such  carriers,  too,  is  fraught  with  a  peculiar  danger;  for  the  carrier's  bill 
of  lading  frequently  stipulates  that  it  shall  have  the  benefit  of  such  insur- 
ance, and  this  provision,  it  has  been  held,  defeats  the  right  of  subrogation 
on  the  part  of  the  insurer. 

Hine  &  Nichols'  Dig,,  595 — s.  c,  117  U.  S.,  312, 

Insurance  of  Property  not  their  Own. 

The  extensive  mercantile  demand  for  insurance  on  personal  property 
belonging  to  other  parties  which  may  be  temporarily  in  the  custody  of 
the  applicant,  justifies  a  few  special  words  on  this  subject.  All  such 
property,  whether  it  be  goods  consigned  to  a  commission  merchant,  de- 
posited in  a  warehouse  in  course  of  transportation  on  a  railroad,  or  sim- 
ply in  the  custody  of  another  awaiting  delivery  to  the  owner,  is  included 
in  the  legal  term  of  bailments.  But  the  obligations  and  responsibilities 
of  custodians  may  differ  very  widely,  and  are  regulated  by  the  specific 
character  of  the  relations  of  each.  Hence,  the  bailee  may  in  one  case 
have  a  large  insurable  interest,  while  in  another,  strictly  speaking,  he 
may  have  none  at  all,  and  insurance  by  him  liiay  be  a  mere  voluntary 
act  for  the  owner.  But  the  liberality  of  the  law  in  permitting  a  bailee  to 
act  for  the  owner  when  the  circumstances  are  such  as  to  justify  it,  even 
without  the  express  authority  of  the  owner,  renders  it  in  all  cases  im- 
portant that  the  actual  ownership  of  the  insured  property  should  be 
stated.  A  policy  simply  on  "  merchandise  contained  in  a  store"  might 
cover  the  interests  of  a  dozen  people  who  were  never  contemplated  by  the 
insurer;  such  phraseology  should  never  be  used;  while  if  on  "  ^w  mer- 
chandise," it  would  be  restricted,  as  was  intended,  to  the  property  of  the 
insured. 

In  general,  it  may  be  said  that  any  language  in  such  a  mercantile  pol- 
icy which  indicates  an  intention  to  cover  other  interests  than  those  of 
the  insured,  will  generally  receive  the  most  liberal  legal  construction  that 
the  words  and  facts  will  justify.  The  language  will  not  always  be  re- 
stricted to  its  rigid  technical  signification,  and  in  case  of  ambiguity  ex- 
trinsic evidence  may  be  admitted  to  show  what  was  intended  by  the  appli- 
cant to  be  included.  Hence,  frequent  disputes  have  arisen  as  to  what 
property  was  intended  in  such  cases,  and  great  care  is  needed  both  in 


51 

the  choice  of  appropriate  language  and  in  ascertaining  what  interests  are 
to  be  included  when  this  class  of  policies  is  to  be  written.  Reference  to 
a  few  of  the  disputed  cases  will  serve  best  to  illustrate  this  subject.  The 
broad,  general  principle  of  the  law  was  thus  laid  down  in  Duncan  vs. 
Ins.  Co.,  12  La.  An.,  486.  The  policy  insured  a  railroad  on  merchan- 
dise in  certain  depots  and  in  transit.  Neither  ownership  nor  interest 
was  stated.  The  policy  provided  that  goods  in  trust  or  on  commission 
must  be  declared.  It  was  held  that  if,  upon  a  general  survey  of  the  poL 
icy-conditions  and  the  circumstances,  the  intention  appeared  to  be  to 
cover  an  interest  not  named,  such  intention  would  not  be  defeated  for  the 
want  of  technical  or  even  customary  phrases;  but  it  would  here  seem  that 
only  the  interest  of  the  railroad  was  intended,  and  it  must  at  least  show 
liability  for  loss  of  goods  belonging"  to  others.  It  was  obvious  that  the 
railroad  could  not  have  intended  simply  its  own  property,  and  the  policy 
was  fatally  defective  in  not  stating  whose  interests  were  intended. 

The  case  of  Home  Ins.  Co.  vs.  Warehouse  Company  (6  Ins.  Law 
Jour.,  39)  is  replete  with  instructive  doctrines  sustained  by  authorities. 
The  insurance  was  taken  out  by  warehousemen  on  "merchandise  their 
own,  or  held  by  them  in  trust,  or  in  which  they  have  an  interest  or  lia- 
bility." It  was  contended,  on  the  one  hand,  that  only  the  interest  of  the 
warehousemen  in  the  property  was  intended,  and  on  the  other  that  the 
policy  covered  the  merchandise  itself,  regardless  of  interest.  The  court 
declared  that  if  the  language  of  a  policy  is  so  ambiguous  as  to  require 
it,  resort  may  be  had  to  outside  evidence  to  ascertain  what  was  intended. 
Where  it  is  taken  out  "  for  or  on  account  of  the  owner,"  or  "on  account 
of  whom  it  may  concern, "  outside  evidence  may  thus  be  taken  (a  suffi- 
cient proof  of  the  faultiness  of  such  language);  but  here  there  is  nothing 
ambiguous,  the  language  is  as  broad  as  possible,  it  was  the  merchandise 
itself  that  was  covered.  If  otherwise,  says  the  court,  why  was  not  the  sub- 
ject described  as  the  interest  of  the  insured  in  the  merchandise,  and  not 
that  merchandise  itself.  The  policy  covered  their  own  merchandise,  to- 
gether with  that  in  which  they  had  any  interest  or  liability,  and  also 
any  merchandise  which  they  held  in  trust.  The  last  phrase  in  insur- 
ance policies  does  not  mean  property  held  technically  as  trustees,  but  in 
the  mercantile  sense  of  goods  intrusted  to  them  by  their  customers.  As 
warehousemen  they  had  liens  for  charges,  expenses,  advances,  and  com- 
missions, which  could  all  be  specifically  insured  under  their  interest. 
They  could  also  insure  in  their  own  names  for  their  customers  as  well  as 
themselves,  as  in  the  present  instance,  and  recover  the  full  value  of  the 
goods.  It  further  appeared  that  the  depositors  had  independently  insured 
their  own  property.     This  was  held  to  be  other  insurance,  and  the  com- 


52 

pany  was  compelled  to  contribute.  It  would  be  diflScult  to  find  the  ob- 
jections to  this  omnibus  style  of  writing  more  completely  summed  up 
than  in  this  single  decision. 

This  right  to  insure  the  property  of  others  in  their  possession,  regard- 
less of  liability  or  authority  from  the  owners,  is  liberally  extended  by  the 
law  to  other  classes  in  the  mercantile  community.  In  Waring  vs.  Ins. 
Co.  it  was  extended  in  the  case  of  a  policy  on  goods  ' '  their  own  or  sold 
but  not  removed  "  to  property  which  had  been  sold  and  paid  for  but 
not  taken  away  for  the  benefit  not  simply  of  the  original  purchasers,  but 
of  successive  owners,  though  not  designated,  and  without  previous  au- 
thority. The  court  distinguished  the  phrase  from  "  sold  but  not  deliv- 
ered," which  referred  to  goods  where  the  ownership  had  not  changed 
for  want  of  technical  delivery.  In  Stillwell  vs.  Staples  (19  N.  Y. ,  401) 
insurance  on  property  held  in  trust  included  cloth  left  with  a  manufac- 
turer to  be  made  into  clothing  without  any  previous  orders  to  insure. 
But  where  the  policy  was  on  goods  "  in  trust,"  in  which  the  nature  of 
such  trust  was  explained  before  insuring,  in  Parks  vs.  Ass'e  Co.  (5  Pick., 
34),  the  insurance  was  restricted  to  the  interest  as  understood.  So,  where 
the  policy  specifically  requires  that  property  so  held  shall  be  stated,  as  in 
Rafael  vs.  Ins.  Co.  (7  La.  An.,  244),  the  provision  must  generally  be 
complied  with.  In  Stillwell  vs.  Staples  (19  N.  Y.,  401),  a  party  insuring 
his  own  and  goods  in  trust  was  allowed  to  elect  whether  the  insurance 
should  apply  solely  to  his  own  or  not.  In  .^tna  Ins.  Co.  vs.  Jackson 
(16  B.  Mon.,  250)  the  policy  was  on  "all  the  articles  making  up  the 
stock  of  a  pork-house,  and  all  within  the  building  and  pertinent  thereto." 
This  sweeping  description  of  the  contents  of  a  risk  like  a  pork-house 
was  held  to  override  a  special  clause  requiring  goods  on  commission  to 
be  insured  as  such,  and  to  cover  everything  that  could  be  included  in  the 
description,  regardless  of  ownership. " 

It  will  be  seen  from  these  cases  how  completely  the  aim  of  the  insurer 
to  restrict  the  policy  to  the  interests  of  the  party  insured  may  be  de- 
feated in  this  class  of  policies  by  failing  to  clearly  designate  the  interests 
which  were  intended  to  be  covered.  Every  additional  interest  which  can 
be  loaded  on  such  a  policy  in  case  of  partial  loss,  is  an  added  liability  for 
which  there  was  no  corresponding  increase  of  premium.  Agents  will 
take  notice  and  avoid  general  and  ambiguous  terms,  as  well  as  blanket 
forms,  in  policy-writing. 

Mortgages,  Judgments,  and  other  Liens. 

A  lien  of  any  kind  against  property,  to  be  insurable,  should  be  specific 
in  its  character.     An  ordinary  creditor  has  no  right  to  insure  the  piojfc 


53 

erty  of  a  debtor  unless  he  has  some  special  claim  upon  that  particular 
property  as  security  for  the  debt,  though  this  claim  need  not  necessarily 
be  a  strictly  legal  lien. 

Ross  vs.  Merch.  Ins.  Co.,  27  La.,  409  ;  Rohrbach  vs.  Germania  Ins.  Co.,  4  Ins.. 
Law  Jour.,  737. 

But  it  is  safer  and  better  in  almost  all  cases  to  restrict  insurances  of  this 
kind  to  such  liens  as  will  follow  the  property  in  any  attempted  transfer 
of  ownership.  Such  are  the  liens  of  factors  and  commission  merchants 
for  advances  or  charges  in  connection  with  goods  in  their  possession,  of 
judgment-creditors,  and  especially  of  mortgagees.  In  all  cases  of  this 
kind,  where  the  legal  tide  vests  in  another,  the  insurance  for  a  creditor 
should  be  on  "his  interest  "as  mortgagee,  etc.  The  better  rule,  how- 
ever, in  the  case  of  all  liens  where  the  property  is  not  actually  in  the  pos- 
session of  the  mortgagee  or  other  lien-holder,  is  to  insure  only  the  legal 
owner  and  protect  the  mortgagee  by  making  the  loss  payable  to  him  as 
his  interest  may  appear.  Not  only  is  the  danger  of  excessive  insurance 
on  the  property  by  two  separate  interests  thus  avoided,  but  another  im- 
portant object  is  gained.  The  party  insured  is  the  one  who  is  responsible 
for  any  violation  of  the  policy-conditions,  he  is  the  party  with  whom  the 
contract  is  made,  and  should  obviously,  if  possible,  be  the  one  who  is  in 
control  of  the  property. 

Sias  vs.  Ins.  Co.,  9  Ins.  Law  Jour.,  154,  and  cases  there  cited. 

Most  important  among  these  liens,  and  those  which  have  occasioned 
most  controversy  in  the  courts,  are  mortgage-interests  in  real  estate.  The 
law  permits  the  mortgagor  to  insure  the  property  to  its  full  value,  regardless 
of  incumbrance,  and  the  mortgagee  or  other  lien-holder  to  insure  to  the 
extent  of  his  interest.  Indeed,  the  latter  has  sometimes  been  allowed, 
without  stating  the  nature  of  his  interest,  to  also  insure  and  recover  the  full 
value  of  the  property.  It  is  important,  therefore,  that  all  separate  insur- 
ance of  mortgagees  should  be  limited  to  their  interest  as  such. 

Columbian  Ins.  Co.  vs.  Lawrence,  10  Pet.,  507;  Ins.  Co.  vs.  Updegraff,  9  Harris,  513. 

In  nearly  all  the  States,  however,  except  Massachusetts,  the  compa- 
nies are  protected  against  the  ultimate  payment  of  more  than  the  actual 
amount  of  damages  by  the  doctrine  of  subrogation,  which  allows  them  to 
demand  an  assignment  of  the  lien  for  their  own  benefit  upon  the  payment 
of  its  full  amount  to  the  lien-holder,  if  the  latter  is  the  party  insured. 

Kemochen  vs.  Ins.  Co.,  17  N.  Y.,  428  ;    .^tna  Ins.  Co.  vs.  Tyler,  16  Wend.,  385. 

Where  the  owner  is  insured  solely  for  his  own  benefit  without  reference 
to  any  claims  of  mortgagees,  the  latter  have  no  rights  in  his  policy.  The 
former  may  retain  the  whole  insurance  money,  though  the  lien  covers  the 


54 

whole  moneyed  value  of  the  property.  The  opportunity  thus  given  for 
fraud  will  suggest  the  propriety  of  making  such  policies  payable  to  mort- 
gagees to  the  extent  of  their  interest,  unless  the  interest  of  the  owner  is 
largely  in  excess  of  the  insurance. 

Stearns  vs.  Ins.  Co.,  7  Ins.  Law  Jour.,  506,  and  cases  there  cited. 

But  mortgages  usually  provide  that  the  mortgagor  shall  insure  for  the 
benefit  of  the  mortgagee,  and  where  such  appears  to  have  been  the  inten- 
tion of  the  parties  the  courts  will  enforce  it. 

Cromwell  vs.  Ins.  Co.,  44  N.  Y.,  42. 

If  a  policy  is  simply  made  payable  to  a  mortgagee  or  to  any  other  party, 
without  limiting  the  amount  of  payment,  the  party  named  may  be  allowed 
by  the  court  to  collect  the  whole  sum,  irrespective  of  interest,  leaving  the 
insured  to  compel  a  repayment  of  the  excess.  Therefore,  indorsements 
of  payments  to  lien-holders  should  be  limited  to  their  interests  as  such. 

Goodall  vs.  Ins.  Co.,  25  N.  H.,  169. 

The  great  advantage  of  policies  which  thus  insure  the  owner  directly, 
with  loss  payable  to  other  parties  as  their  interest  may  appear,  is  that  the 
owner's  interests  as  well  as  the  others,  are  protected.  Whatever  the  mort- 
gagee receives  will  cancel  by  so  much  the  mortgage-debt,  while  the  bal- 
ance goes  to  the  owner.  Such  is  not  usually  the  case  where  the  mort- 
gagee or  lien-holder  is  the  insured  party.  The  owner  here  has  no  inter- 
est. The  company,  by  paying  its  amount,  is  entitled  to  receive  and  en- 
force the  mortgage  against  him. 

Parties  to  whom  policies  are  thus  made  payable  have  no  other  rights 
under  the  contract  than  that  of  receiving  the  money,  if  the  company  is 
obligated  to  pay  at  all.  The  insured  may  surrender  the  policy,  and  to 
prevent  this  the  mortgagee  usually  keeps  the  instrument ;  or  he  may 
render  it  void  by  violating  its  conditions,  or  the  company  may  elect  to 
replace  or  repair  the  property,  in  which  case  no  moneyed  damages  are 
payable.     - 

Brunswick  Savings  Inst.  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  120,  and  cases  there  cited  ; 
Heilman  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  53;  Stamps  vs.  Ins.  Co.,  7  Ins.  Law  Jour.,  256, 

To  avoid  the  danger  of  having  the  policy  avoided  by  acts  of  the 
insured,  many  mortgagees,  especially  corporations,  insist  on  what  are 
known  as  mortgage-clauses  being  attached  to  the  policies,  stipulating  in 
eifect  that,  if  thus  forfeited  as  to  the  interest  of  the  mortgagor,  they  shall 
remain  valid  as  to  the  mortgagee.  The  effect  of  such  a  clause  in  case  of 
violation  by  the  mortgagor  is  to  convert  the  policy  into  a  direct  insurance 
of  the  mortgagee,  under  a  contract  wholly  independent  of  the  mortgagor. 

Five  Cents  Savings  Bank  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  437  ;  Meriden  Savings  Bank 
vs.  Ins.  Co.,  12  Ins.  Law  Jour.,  620. 


55 

The  original  insured  is  thus  released  from  all  obligations  in  respect  to 
the  premises.  In  case  of  such  independent  insurance  of  the  mortgagee, 
the  company,  upon  the  payment  of  the  mortgage,  is  usually  subrogated 
to  his  rights  against  the  mortgagor.  In  case  of  other  insurance  by  the 
latter,  no  contribution  can  be  compelled.  Replacement  can  only  be 
effected  with  the  consent  of  the  mortgagor  in  possession. 

Ulster  Savings  Inst.  vs.  Decker,  7  Ins.  Law  Jour.,  859  ;  Foster  vs.  Van  Reed,  8  Ins. 
Law  Jour.,  201 ;  ^tna  Ins.  Co.  vs.  Baker,  10  Ins.  Law  Jour.,  253  ;  Bank  vs.  Ins. 
Co.,  9  Ins.  Law  Jour.,  928. 

Though  in  practice,  where  other  insurance  by  the  mortgagor  exists, 
the  companies  are  usually  able  by  co-operation  to  effect  a  single  settle- 
ment of  the  loss,  either  by  a  single  money  payment  or  replacement,  the 
attachment  of  such  mortgage-clauses  is  strongly  objected  to  by  many  of 
them,  because  they  thus  release  all  parties  from  responsibility  for  the  care 
of  the  property  or  the  truthfulness  of  the  representations  on  which  the 
insurance  has  been  secured.  The  same  objections,  of  course,  attach  to 
insurance  directly  on  the  interest  of  the  mortgagee,  judgment-creditor,  or 
other  lien-holder.  In  Conn.  Fire  Ins.  Co.  vs.  Ins.  Co.  (15  Ins.  Law  Jour., 
895)  the  property  was  independently  insured  by  the  owner,  the  mortgagee, 
and  the  lessee;  it  was  replaced  by  the  insurer  of  the  latter,  and  the  court 
ruled  that  no  contribution  could  be  collected  from  the  other  insurers, 
since  they  were  on  different  interesjts. 

In  regard  to  all  clauses  stipulating  for  a  payment  of  the  insurance 
money  to  another  than  the  party  insured,  it  should  be  remembered  that 
insurance  is  in  its  nature  a  personal  contract,  that  the  question  of  moral 
hazard  largely  enters,  and  the  companies  attach  no  less  importance  to  the 
parties  interested  than  to  the  property.  For  these  reasons  everything  that 
gives  it  an  impersonal  character  should  be  avoided.  The  law  regards 
such  language  as  "payable  to  whom  it  may  concern,"  or  "as  interest 
may  appear  at  time  of  loss, "'  without  naming  a  party,  or  to  a  party  named 
regardless  of  interest,  somewhat  as  a  check  payable  to  bearer.  Any  per- 
son answeiing  the  description  would  be  entitled  to  the  money.  Where 
it  is  possible  to  do  so,  therefore,  both  the  particular  party  and  his  interest 
should  be  stated. 

Wood  on  Ins.,  Sec.  282,  and  cases  there  cited. 

Caution  to  Agents. 

The  caution  to  agents  is  repeated  to  keep  within  the  limits  of  their 
authority  and  the  known  or  presumed  usages  or  rules  of  their  companies. 
Several  of  the  foregoing  pages  have  been  written  as  a  warning  against  the 


S6 

classes  of  risks  described  rather  than  as  instructions  how  to  write  them. 
In  all  cases  of  this  sort  the  safe  plan  is  to  correspond  with  the  company, 
and  only  act  upon  specific  instructions  in  each  particular  case. 

Incidents  Connected  with  the  Title. 

change  of  title  or  interest.* 

As  has  been  said,  a  permanent  transfer  of  all  his  insurable  interest  by 
the  insured  to  another  party  will,  of  itself,  forfeit  the  policy  unless  the 
company  also  consents  to  transfer  his  rights  under  the  policy.  Such  a 
transfer  by  the  insured  is  what  is  known  as  an  alienation.  If  the  aliena- 
tion is  only  temporary,  however,  and  the  interest  is  re-transferred  before 
the  loss  occurs,  the  policy  will  again  attach. 

Young  vs.-  Ins.  Co.,  14  Gray,  150  ;  Baldwin  vs.  Ins.  Co.,  10  Ins.  Law  Jour.,  32  ; 
Hitchcock  vs.  Ins.  Co.,  26  N.  Y.,  68. 

But  there  are  many  changes  in  the  nature  and  extent  of  the  interest  of 
the  insured  which  fall  short  of  a  complete  alienation,  which  leave  him  with 
perhaps  only  a  very  limited  interest  in  the  property,  but  yet  which  would  be 
sufficient  in  law  to  sustain  an  insurance.  To  protect  against  such  changes, 
special  prohibitions  are  inserted  in  policies  against  any  change  of  title  or 
possession.  The  thing  prohibited  by  such  clauses  is  the  transfer  to  other 
parties  of  the  legal  rights  of  the  insured,  whether  in  respect  to  the  owner- 
ship or  control.  An  incumbrance  is  not  a  change  of  title,  nor  is  a  mere 
agreement  to  sell,  if  the  actual  sale  has  not  taken  place.  So  it  has  been 
held  that  involuntary  transfers  through  the  action  of  the  law,  such  as 
seizure  and  sale  by  the  sheriff,  are  not  what  is  intended  by  the  language 
of  the  policy,  unless  specifically  included  in  the  prohibition. 

Baldwin  vs.  Ins.  Co.,  10  Ins.  Law  Jour.,  32  ;  Keeney  vs.  Ins.  Co.,  7  Ins.  Law  Jour., 
100  ;  Browning  vs.  Ins.  Co.,  7  Ins.  Law  Jour.,  428  ;  Appleton  Iron  Co.  vs.  Ins.  Co., 
46  Wis.,  23  ;  Jackson  vs.  Ins.  Co.,  23  Pick.,  418  ;  Byers  vs.  Ins.  Co.,  9  Ins.  Law 
Jour.,  743  ;  Sherwood  vs.  Ins.  Co.,  73  N.  Y.,  447. 

*  Note. — As  a  matter  of  practice  the  agent  should,  as  far  as  possible,  keep  himself 
advised  of  all  changes  of  title  to  or  interest  in  property  covered  by  his  policies.  When 
he  ascertains  that  a  change  has  occurred  he  should  do  one  of  two  things  at  once. 
(1.)  If  the  change  brings  in  a  man  or  men  who  would  be  acceptable,  persons  whom 
he  would  insure  as  readily,  and  on  the  same  terms,  as  the  original  parties,  he  should 
promptly  make  the  necessary  indorsement  on  the  policy  and  report  the  same  to  the 
company.  (2. )  If,  however,  the  change  brings  in  people  whom  he  would  not  insure, 
he  should  just  as  promptly  cancel  the  policy  and  return  it  to  the  home  ofifice.  Scrutiny 
should  also  be  exercised  to  ascertain  whether  such  changes  indicate  adversity,  embar- 
rassment, removal,  speculative  experiment,  or  anything  else  which  might  result  in 
reduced  value  of  property  or  increased"  moral  hazard,  and,  if  these  signs  should  be 
observed,  cancelment  should  promptly  follow. 


57 

The  effect  of  a  transfer  of  a  part  of  the  insured  property  has  been  held 
by  some  of  the  courts  to  vitiate  the  whole  policy,  while  by  others  a  dis- 
tinction has  been  made  between  those  cases  where  the  insurance  is  for  a 
single  amount  on  the  whole  and  those  where  it  is  apportioned  among 
different  items,  the  policy  being  still  held  good  as  to  such  items  as  have 
not  been  alienated.  So  it  has  been  disputed  whether  a  transfer  from  one 
partner  to  another  is  within  the  prohibition,  where  the  insurance  is  to 
the  firm,  and  the  prevailing  opinion  is  that  it  is  not.  But  where  the 
transfer  is  made  to  a  new  partner,  who  was  not  a  member  of  the  original 
firm,  the  prevailing  opinion  is  that  this  constitutes  a  change  of  title. 

Hinman  vs.  Ins.  Co.,  48  Wis.,  36  ;  Baldwin  vs.  Ins.  Co.,  supra  ;  Card  vs.  Ins.  Co., 
Hine  &  Nichols'  Dig.,  74 ;  Hoffman  vs.  Ins.  Co.,  33  N.  Y.,  405. 

In  all  such  questions,  however,  the  answer  will  largely  depend  on  the 
precise  wording  of  the  policy,  the  court  favoring  such  a  construction  as 
will  support  the  insurance  if  any  insurable  interest  exists.  For  this  reason 
the  prohibition  is  often  extended  in  the  policy  to  cover  all  changes  which 
reduce  the  insurable  interest;  whether  by  incumbrance,  legal  process,  or 
judicial  decree,  whether  in  whole  or  in  part,  voluntary  or  involuntary. 
The  safe  rule,  therefore,  for  the  insured  is  to  make  no  conveyance  or 
transfer  and  impose  or  suffer  no  lien  upon  the  property,  whether  volun- 
tary' or  involuntary,  without  duly  notifying  the  company  and  securing  its 
consent. 

All  assignments  of  policies  from  one  owner  to  another  should  be  exe- 
cuted on  the  regular  assignment-blanks  furnished  for  the  purpose.  The 
signature  should  be  that  of  the  owner  himself,  the  duty  of  the  agent  is 
limited  to  indorsing  consent.  An  agent  has  no  more  right  to  transfer 
a  policy  from  one  owner  to  another  by  an  ex  parte  indorsement,  than  to 
transfer  any  other  contract.  His  authority  is  restricted  to  giving  consent 
for  the  company.  All  indorsements,  of  whatever  kind,  which  he  may  be 
called  on  to  make,  the  agent  should  sign  personally  in  writing  as  agent. 
Another  important  precaution  to  be  noted  in  this  connection  is  that  pol- 
icy-forms should  never  be  signed  in  blank,  for  they  might  be  surrepti- 
tiously filled  in  by  other  parties  and  the  company  made  liable. 

Incumbrance. 

The  effect  of  incumbrances  in  reducing  the  interest  of  the  owner  is  so 
obvious  that  the  question  whether  the  property  is  incumbered  is  one  of 
the  most  important  in  the  application,  and  the  prohibition  against  incum- 
brance one  of  the  most  important  in  the  policy.  False  answers  in  the 
one  case,  and  violations  in  the  other,  are  prominent  among  the  grounds 
on  which  loss-payments  have  been  refused  by  the  companies.     Any  valid. 


58 

lien  which  attaches  especially  against  the  property,  that  is,  which  would 
follow  the  property  if  transferred  to  another  party,  should  be  regarded  as 
an  incumbrance,  whether  it  be  in  the  shape  of  a  mortgage,  tax-lien,  at- 
tachment, judgment,  dower  right,  mechanics'  lien,  or  any  specific  legal 
obligation  whatever  imposed  on  the  property  to  respond  to  the  demands 
of  another.  This  is  the  safe  rule,  for  it  is  difficult  to  determine  in  some 
cases  just  what  will  be  deemed  an  incumbrance  within  the  policy.  The 
mere  rental  of  property,  however,  for  a  term  of  years,  is  not  treated  as  an 
incumbrance. 

Fuller  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  841  ;  Baley  vs.  Ins.  Co.,  9  Ins.  Law  Jour., 
187  ;  Redmond  vs.  Ins.  Co.,  10  Ins.  Law  Jour.,  287  ;  Ohio  Ins.  Co.  vs.  Britton,  7 
Ins.  Law  Joiu-.,  632  ;  Lockwood  vs.  Ins.  Co.,  11  Ins.  Law  Jour.,  40, 

In  all  cases,  therefore,  where  insurance  is  applied  for,  inquiry  should 
be  made,  not  simply  whether  the  property  is  mortgaged  or  pledged,  but 
whether  other  parties  are  interested,  or  have  claims  or  rights  of  any  kind 
in  respect  to  it ;  and  if  it  appears  doubtful  whether  a  lien  or  claim  would  be 
deemed  an  incumbrance,  let  the  fact  of  its  existence  be  staled  in  the  ap- 
plication and  in  the  policy,  if  called  for.  The  validity  of  the  policy  will 
be  governed,  not  by  what  the  applicant  may  think  to  be  an  incumbrance, 
but  what  the  law  so  regards.  If  more  than  one  incumbrance  exists,  all 
should  be  stated,  together  with  their  character  and  the  amount  of  each. 
Let  the  company  be  the  judge  of  their  importance.  Failures  in  this  re- 
spect have  been  the  cause  of  repeated  forfeitures. 

Lowell  vs.  Ins.  Co.,  8  Cush.,  127  ;  Masters  vs.  Ins.  Co.,  11  Barb.,  624;  Wilbur  vs. 
Ins.  Co.,  10  Cush.,  446. 

If  no  stipulation  is  made  regarding  subsequent  incumbrances,  an  in- 
cumbrance imposed  on  the  property  after  the  insurance  has  been  granted 
will  not  affect  the  validity  of  the  policy.  But  the  policy  generally  provides 
that  it  shall  be  void,  also,  in  the  case  of  subsequent  incumbrance  without 
consent  first  obtained  from  the  company.  Such  knowledge  and  consent, 
therefore,  are  as  important  in  this  case  as  before.  The  courts  uniformly 
hold  that  in  either  case  a  concealment  of  the  facts  by  the  insured,  when 
thus  called  for  by  the  application  or  policy,  will  vitiate  the  insurance. 

Redmond  vs.  Ins.  Co.,  10  Ins.  Law  Jour.,  287,  and  cases  there  cited  ;  Supple  vs. 
Ins.  Co.,  II  Ins.  Law  Jour.,  782  ;  Indiana  Ins.  Co.  vs.  Brehm,  12  Ins.  Law  Jour., 
607,  and  cases  there  cited  ;  Ellis  vs.  Ins.  Co.,  12  Ins.  Law  Jour.,  895. 

While,  as  has  been  said,  an  incumbrance  is  not  of  itself  a  change  of 
title,  it  frequently  results  in  such  change,  or  even  complete  alienation, 
through  foreclosure.     The  company,  therefore,  should  be  promptly  noti- 
fied of  foreclosure  or  any  other  legal  proceedings,  such  as  insolvency, 
calculated  to  affect  the  ownership. 


59 

Keeney  vs.  Ins,  Co.,  7  Ins.  Law  Jour.,  100;  Strong  vs.  Ins,  Co.,  10  Pick.,  40; 
Ayres  vs.  Ins.  Co.,  17  Iowa,  180. 

The  death  of  the  insured  has  also  in  some  cases  been  held  to  be  a 
change  of  title  and  a  ground  of  forfeiture,  though  policies  are  usually 
good  to  the  heirs.  So  the  dissolution  of  a  partnership  may  terminate  a 
policy  to  partners.  The  company  should  consequently  be  notified  in 
either  case,  and  proper  indorsements  secured  if  it  should  appear  desirable 
to  continue  the  insurance. 

Keeney  vs.  Ins.  Co.,  3  T.  &  C,  478  ;  Dreher  vs.  Ins.  Co.,  18  Mo.,  128 ;  Burbank 
vs.  Ins.  Co.,  24  N.  H.,  550  ;  Lappin  vs.  Ins.  Co.,  58  Barb.,  325. 

Another  important  point  regarding  changes  in  the  interest  of  the  in- 
sured, whether  affecting  his  title  or  in  the  shape  of  incumbrances,  is  that 
unless  the  agent  is  on  his  guard  a  renewal  of  the  insurance  where  such 
changes  are  known  by  the  agent  may  result  in  waiving  the  forfeiture  of 
the  policy. 

Hay  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  633  ;  Aurora  Ins.  Co.  vs.  Kranich,  6  Ins.  Law 
Jour.,  676. 

The  law  tegards  all  incumbrances  which  seriously  affect  the  moneyed 
interest  of  the  insured  in  the  property  as  of  vital  importance,  and  any 
failure  to  correctly  state  such  facts  as  are  called  for  is /rmaya^l?  evi- 
dence of  bad  faith.  A  man  may  be.ignorant  of  law  and  thus  state  inac- 
curately the  nature  of  his  title,  and  the  law  will  look  leniently  on  such 
cases ;  but  a  failure  to  disclose  a  lien  which  seriously  reduces  the  value  of 
the  property  to  him  is  looked  on  as  a  plain  breach  of  faith. 

The  practical  point  to  the  agent  in  all  this  detail  is  to  show  him  how 
easily  a  company  may  become  involved  in  difficulty  through  his  ignor- 
ance or  inadvertance,  and  to  emphasize  the  well-known  rules  of  the  best 
companies  to  keep  off  or  to  get  off  from  property  which  is  too  heavily 
mortgaged,  to  drop  men  who  get  into  embarrassed  and  desperate  cir- 
cumstances, and  to  avoid  complicated  ownerships ;  all  these  things  tend 
toward  incendiarism  and  fraud,  and  are  productive  of  loss  to  the  com- 
panies. 

Valuation  of  Insured  Property. 

Under  the  ordinary  open  policy  the  amount  to  be  recovered  in  case 
of  loss  is  always  limited  in  law  to  the  measure  of  actual  damages,  no 
matter  how  much  may  be  insured,  except  in  those  States  where  the 
valued-policy  law  is  in  force.  But  in  spite  of  this  legal  limitation,  and 
in  spite  of  the  fact  that  the  company  may,  by  replacement,  protect 
itself  against  attempted  extortion,  the  opportunities  for  concealment  and 


fraud  are  so  numerous,  and  the  difficulty  of  securing  a  fair  estimate 
of  the  damage  after  a  loss  has  often  proved  so  great,  that  overinsurance 
has  become  the  recognized  bane  of  the  business,  and  is  a  danger 
against  which  the  agent  should  ever  be  on  his  guard.  Wherever  the 
valued-policy  law  exists,  the  sum  insured  in  case  of  total  loss  becomes 
the  measure  of  liability,  no  matter  what  the  actual  value  of  the  building 
may  be,  nor  what  stipulations  to  the  contrary  may  be  made  between  the 
parties. 

Queen  Ins.  Co.  vs.  Ice  Co.,  15  Ins.  Law  Jour.,  109  ;  Reilly  vs.  Ins.  Co.,  7  Ins.  Law 
Jour.,  391,  and  cases  there  cited. 

Under  this  law  a  peculiar  responsibility  rests  upon  the  agent  Negli- 
gence on  his  part  in  permitting  excessive  insurance  may  impose  an 
excessive  loss  upon  his  company,  of  which  judicial  cognizance  could  be 
taken  as  it  could  not  ordinarily  be  where  the  law  limits  recovery  to  the 
actual  amount  lost,  and  there  is  no  sound  reason  in  such  a  case  why 
the  agent  could  not  be  compelled  to  respond  to  his  company  in  dam- 
ages. In  the  absence  of  such  a  law,  the  injury  which  may  be  done  is 
not  confined  to  the  risk  of  assessing  excessive  damages,  but  may  pre- 
vent the  company  from  taking  advantage  of  a  manifest  attempt  at  fraud. 
This  was  illustrated  in  the  case  of  Dupree  vs.  Ins.  Co.  (14  Ins.  Law 
Jour.,  57).  It  was  claimed  that  the  insured  had  forfeited  all  right  of 
recovery  by  fixing  a  knowingly  false  and  fraudulent  value  in  the  applica- 
tion ;  the  answer  was,  that  the  property  had  been  examined  and  valued 
by  the  agent,  and  the  answer  was  justified  by  the  court 

A  fraudulent  overvaluation  of  his  property  by  the  insured  when  apply- 
ing for  insurance  will  forfeit  the  policy  if  it  can  be  conclusively  proved, 
and  a  grossly  excessive  valuation  will  be  treated  as  evidence  tending  to 
prove  a  fraud.  But  the  mere  fact  of  the  valuation  being  thus  excessive 
will  not,  as  a  matter  of  law,  be  treated  as  conclusively  fraudulent,  though 
under  special  stipulations  in  the  contract,  the  simple  fact  of  a  gross  excess 
has  been  allowed  to  defeat  the  policy.  While,  therefore,  dishonesty  is 
discouraged  by  the  law,  the  latter  must  not  be  depended  on  to  prevent  it 

Franklin  Ins.  Co.  vs.  Vaughan,  2  Otto,  516  ;  Sidney  vs.  Ins.  Co.,  8  Ins.  Law  Jour., 
461  ;  Citizens*  Ins.  Co.  vs.  Short,  8  Ins.  Law  Jour.,  126 ;  Boutelle  vs.  Ins.  Co.,  7  Ins. 
Law  Jour.,  781. 

The  agent's  judgment  as  to  values  for  insurance  purposes  should  be 
governed  by  the  same  commercial  principles  which  the  law  applies  in 
case  of  loss.  This  is  in  all  cases  the  cash  value  at  the  time  and  place  ; 
that  is,  the  amount  of  cash  down  which  would  be  the  commercial 
equivalent  of  the  property.  The  meaning  of  this  term  will  be  more 
clearly  understood  when  it  is  contrasted  with  what  is  not  a  correct  meas- 


6i 

ure  of  value.  It  is  not  what  the  thing  may  be  worth  to  the  owner,  but 
what  others  would  give  for  it.  This  was  well  illustrated  in  the  case  of 
Niblo  vs.  Ins.  Co.  (i  Sandf.,  551),  where  the  insurance  was  on  a  lease- 
hold interest  in  which  by  reason  of  the  circumstances  the  insured  had  a 
special  interest,  but  the  court  held  that  the  true  question  was,  ' '  How 
much  would  a  stranger,  having  no  contracts  pending,  have  given  for  the 
unexpired  lease  ?"  The  cost  of  replacing  the  subject  of  insurance  should 
rarely  be  regarded  as  a  correct  measure  9f  value.  Ordinarily,  this 
involves  the  substitution  of  new  for  old,  which  would  manifestly  be 
unjust.  Frequently  it  involves  the  replacement  of  a  subject  whose  com- 
mercial value  would  not  equal  the  cost  of  producing  it.  An  antiquated 
machine  might  be  very  complicated,  and  require  a  heavy  outlay  to 
reproduce,  whereas  the  introduction  of  a  newer  and  cheaper  substitute  or 
a  change  in  the  method  of  manufacturing  may  have  rendered  it  of  little 
value.  Manufactured  articles  may  have  been  expensive  to  create,  but 
something  newer  has  taken  their  place,  their  commercial  value  has  gone. 
For  these  reasons  the  cost  of  reproduction  or  replacement  is  seldom  rec- 
ognized by  the  courts  as  of  itself  a  fair  test  of  value, 

Hoffman  vs.  Ins.  Co.,  i  La.  An.,  216;  ^Etna  Ins.  Co.  vs.  Johnson,  11  Bush., 
587  ;  Commercial  Ins.  Co.  vs.  Sennett,  37  Penn.  St.,  205  ;  Carson  vs.  Ins.  Co., 
2  Wash.,  468. 

When  the  subject  of  insurance  is  of  a  kind  that  has  a  ready  market- 
sale,  as  in  the  case  of  ordinary  merchandise,  the  cash  market-value  is  the 
legal  value.  But  here  again  the  agent  must  be  on  his  guard.  The 
retail  price  of  merchandise  in  stock  is  by  no  means  what  insurers  nor 
even  the  courts  in  all  cases  regard  as  its  value.  That  price  includes  the 
profit  of  the  seller,  which  is  no  part  of  the  subject  of  insurance.  The 
question  is,  what  are  they  worth  as  a  whole,  and  in  the  place  where  they 
are  to  parties  wishing  to  purchase  ?  In  the  case  of  manufacturers  and 
others  as  well,  the  question  should  be  narrowed  down  still  farther; 
they  may  be  able  to  replace  the  stock  at  less  than  an  outsider  would  be 
willing  to  give  for  it,  so  that  here  the  legal  rule  would  allow  an  insur- 
ance of  profits.  For  ihsurance  purposes,  therefore,  the  value  should 
never  be  regarded  as  more  than  the  actual  cost  to  the  insured  of  replace- 
ment. And  since  the  companies  are  rarely  willing  to  insure  the  full 
estimated  value,  and  since  the  value,  too,  is  likely  to  be  depreciated,  this 
figure  should  be  taken  simply  a:s  a  gauge  from  which  a  proper  reduction 
is  to  be  made.  In  the  case  of  property  which  may  have  a  ready  sale,  but 
is  not  of  a  merchantable  character,  such  as  household  goods,  the  safe  rule 
is  to  treat  it  as  worth  no  more  than  it  would  bring  at  auction. 

Marchesseau  vs.  Ins.  Co.,  i  Rob.,  La.,  438;  Hercules  Ins.  Co.  vs.  Hunter,  14  C.  C. 


62 

S.,  1,137  ;  Fowler  vs.  Ins  Co.,  6  Ins.  Law  Jour.,  432  ;  Murphrey  vs.  Ins.  Co.,  5  Ins. 
Law  Jour.,  297. 

Buildings  having  no  ready  sale,  and  being  of  little  value  apart  from  the 
land  on  which  they  stand,  are  subject  to  a  different  rule.  The  law  esti- 
mates the  value  of  a  building  on  the  same  principle  as  does  a  purchaser 
who  first  fixes  on  what  the  ground  is  worth,  and  then  how  much  in  addition 
should  be  allowed  for  the  building.  Its  age,  utility,  general  condition, 
and  cost  of  construction  or  replacement,  may  all  furnish  aid  towards 
framing  a  judgment,  but  its  cost  or  the  cost  of  replacement  is  by  no 
means  the  correct  measure  of  its  worth. 

Brinley  vs.  Ins.  Co.,  11  Met.,  195  ;  ^tna  Ins.  Co.  vs.  Johnson,  ante. 

In  practice  this  legal  rule  has  been  found  to  be  extremely  favorable  to 
the  insured,  allowing  damages  to  be  assessed  by  a  jury  without  any  fixed 
basis,  and  often  in  fact  computed  on  the  cost  of  restoring.  The  law  has 
refused,  also,  to  recognize  the  fact  that  a  building  whose  speedy  removal 
is  compelled,  or  whose  restoration,  if  damaged,  the  law  will  not  permit, 
is  on  that  account  any  the  less  valuable,  though  it  may  be  practically 
worthless.  . 

Bayly  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  503  ;  Collingridge  vs.  Royal  Exchange, 
Q.  B.  L.  R.,  3  Q.  B.  D. ;  Brady  vs.  Ins.  Co.,  11  Mich.,  425  ;  Brown  vs.  Ins.  Co., 
I  E.  &  E.,  853. 

The  legal  rule  as  to  buildings,  therefore,  is  not  always  a  safe  guide  for 
the  agent,  even  as  a  standard  from  which  to  estimate,  since  it  sometimes 
enables  the  insured  to  dispose  of  his  property  to  the  company  at  a 
fictitious  price,  or  rid  himself  of  property  otherwise  unsalable.  In  addi- 
tion to  the  actual  worth  as  commonly  estimated,  the  agent  should  closely 
scan  the  rental  value  and  treat  with  the  utmost  caution  buildings  that 
are  unprofitable,  liable  to  removal,  or  which  if  seriously  damaged 
could  not  be  repaired  on  account  of  building  laws.  All  such  should 
be  insured  for  much  less  than  what  would  otherwise  be  their  apparent 
worth,  or  should  be  declined  in  toto.  The  safe  rule,  aside  from  all 
legalties,  is  to  insure  only  such  property  as  is  valuable  to  the  owner, 
and  then  never  to  insure  it  for  such  an  amount  or  in  such  a  manner 
as  to  render  the  insurance  of  more  value  than  the  property. 

Other  Insurance. 

The  same  reasons  which  lead  the  companies  to  restrict  the  amount  of 
insurance  which  they  are  willing  to  grant  upon  property,  lead  them  also 
to  insist  that  additional  insurance  shall  not  be  taken  out  in  other  com- 
panies, without  their  consent     The  policy-prohibition  against  other  in- 


63 

surance  is  grounded  upon  the  danger  of  overinsuramce  and  consequent 
fraud.  There  is  another  important  reason,  too,  for  this  requirement.  In 
case  of  loss  the  contributing  liabiUty  of  each  insurer  is  affected  by  the 
conditions  as  well  as  amounts  of  other  policies,  and  since  additional  in- 
surance to  a  limited  amount  may  frequently  be  an  advantage  by  reduc- 
ing the  liability,  a  stipulation  that  a  certain  amount  of  insurance  shall 
be  maintained  is  also  sometimes  added.  The  force  of  these  reasons  is 
fully  recognized  by  the  courts,  and  a  violation  of  the  stipulations  regard- 
ing  other  insurance,  unless  v^^aived,  will  result  in  the  penalty  being  en- 
forced, which  is  generally  forfeiture. 

Kennedy  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  359;  Behler  vs.  Ins.  Co.,  9  Ins.  Law  Jour., 
798;  Phoenix  Ins.  Co.  vs.  Stevenson,  8  Ins.  Law  Jour.,  922;  Pitney  vs.  Ins.  Co.,  4  Ins. 
Law  Jour.,  765. 

Every  insurance,  however,  on  the  same  property  is  not  recognized  by 
the  courts  as  other  insurance,  and  the  object  aimed  at  by  the  companies 
is  thus  often  defeated.  Not  only  must  the  insurance  cover  the  same  sub- 
ject-matter, but  the  same  interest.  In  the  case  of  City  Savings  Bank  vs. 
Ins.  Co.  (6  Ins.  Law  Jour.,  437)  the  property  was  insured  by  the 
owner,  and  afterwards  a  mortgagee  obtained  insurance  independently  on 
his  own  interest  This  was  held  not  to  be  other  insurance  within  the 
meaning  of  the  first  policy,  it  was  on  a  wholly  different  interest  So,  in 
Wheeler  vs.  Ins.  Co.  (10  Ins.  Law  Jour.,  354),  a  policy  for  his  benefit 
was  taken  out  by  the  owner  of  the  property,  and  another  policy  was 
secured  independently  by  the  mortgagee.  This  was  declared  not  to  be  a 
case  of  other  insurance.     The  policies  were  on  separate  interests. 

See  also  Jackson  vs.  Ins.  Co.,  23  Pick.,  418;  Thomas  vs.  Ins.  Co.,  119  Mass.,  121; 
Harris  vs.  Ins.  Co. ,  5  Ohio,  467.  Also  what  is  said  anie  concerning  mortgage  in- 
terests. 

But  the  mere  fact  that  one  of  the  policies  is  payable  to  another  party, 
will  not  amount  to  separate  interests  if  the  interest  and  the  party  insured 
are  the  same.  In  Pitney  vs.  Ins.  Co.  (4  Ins.  Law  Jour.,  765)  the  owner, 
who  held  a  policy  payable  to  himself,  afterwards  procured  another,  pay- 
able as  interest  should  appear  to  another.  This  was  not  insurance  of  a 
separate  interest,  and  was  held  to  be  a  violation. 

Again,  it  is  not  always  easy  to  determine  whether  the  double  insurance 
is  strictly  on  the  same  subject-matter  where  the  policies  are  not  concur- 
rent, and  the  courts  are  not  agreed  how  far  non-concurrency  will  affect 
the  question.  In  Sloat  vs.  Ins.  Co.  (49  Pa.  St,  14)  one  policy  covered 
the  building,  while  another  covered  the  building,  machinery,  tools,  etc., 
and  it  was  held  not  to  be  a  case  of  fatal  double  insurance  within  the 
policy.     So,  in  Bait  Ins.  Co.  vs.  Loney  (20  Md.,  20),  a  pt)licy  on  mer- 


64 

chants'  goods  and  another  on  his  own  goods  and  those  held  on  commis- 
sion were  held  not  to  be  double  insurances.  On  the  other  hand,  in 
Walton  vs.  Ins.  Co.  (2  Rob.,  La.,  563),  goods  which  were  insured  in 
one  store  were  afterwards  removed  to  another,  in  which  was  a  stock  of 
goods  whose  insurance  under  another  policy  was  by  its  terms  extended 
to  the  added  stock ;  this  was  held  to  be  a  double  insurance.  In  Ramsay 
Co.  vs.  Ins.  Co.  (11  U.  C,  Q.  B.,  516)  one  poHcy  insured  on  building 
and  machinery,  and  the  other  on  these  and  the  stock.  This  was  held 
to  be  a  double  insurance.  In  short,  it  may  be  said  that  strict  concur- 
rency is  not  always  essential  to  constitute  other  insurance,  a  partial  con- 
currency may  be  enough  to  violate  the  condition. 

Another  and  the  principal  legal  difficulty  in  deciding  whether  there 
has  been  other  insurance,  arises  from  the  existence  of  similar  or  nearly 
similar  clauses  in  both  policies,  making  them  void  in  such  case.  Here, 
again,  the  decisions  have  been  conflicting.  In  some  cases  it  has  been 
held  that  where  the  one  policy  is  rendered  void  by  the  procurement  of 
another  in  violation  of  its  terms,  there  is  no  other  insurance  within  the 
meaning  of  the  second  policy.  In  other  cases,  however,  it  has  been  held 
that  the  first  policy  was  not  actually  void,  but  only  voidable;  that  other 
insurance  therefore  existed  ;  and  where  the  policy  expressly  forbids 
other  insurance  even  though  void,  such  other  insurance  will  work  a  for- 
feiture. 

Phoenix  Ins.  Co.  vs.  Lamar,  15  Ins.  Law  Jour.,  686 ;  Stevenson  vs.  Ins.  Co.,  14 
Ins.  Law  Jour.,  65;  Behrens  vs.  Ins.  Co.,  13  Ins.  Law  Jour.,  492;  Gee  vs.  Ins.  Co.,  4 
Ins.  Law  Jour.,  489;  Southerland  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  i8i,  and  cases 
there  cited. 

The  clear  intention  of  the  underwriters  has  in  these  various  ways  re- 
peatedly been  defeated  by  the  coiArts.  Attention  should  be  directed,  there- 
fore, not  simply  to  the  question  whether  there  is  other  insurance  beyond 
a  legal  quibble,  but  whether  the  property  is  covered  either  in  whole  or 
in  part  by  another  policy,  no  matter  in  whose  interest  it  may  be  issued. 
As  has  been  already  noted,  one  of  the  chief  objections  to  the  insurance 
of  merely  equitable  and  limited  interests,  such  as  those  of  a  mortgagee, 
arises  from  the  probability  of  other  insurance,  which  cannot  be  com- 
pelled to  contribute  in  case  of  loss.  Another  precaution  which  should 
be  observed,  is  that  in  case  of  other  insurance  the  policies  should  be 
made  as  nearly  as  possible  concurrent,  that  is,  one  policy  should  not  be 
made  general  or  floating  as  to  two  or  more  items  where  the  other  insures 
specific  sums  en  each,  a  matter  which  is  explained  more  fully  under 
"Concurrency  in  Writing." 

But  the  mjsconduct,  or  alleged  misconduct,  of  the  agent,  more  than 
any  other   cause,   has  been   instrumental   in   defeating  the   prohibition 


65 

against  other  insurance,  through  his  waiver  of  the  stipulation.  The  pol- 
icy usually  stipulates  for  notice  and  the  indorsement  of  a  written  consent 
in  case  of  other  insurance.  But  notice  is  generally  received  and  the 
indorsement  made  by  an  authorized  agent.  Unless  there  be  some  ex- 
press provision  in  the  policy  to  the  contrary,  the  law  regards  the  agent 
who  is  authorized  to  write  the  policy  as  the  proper  party  to  give  the 
consent,  and  his  verbal  acquiescence,  or  even  knowledge  at  the  time  of 
contracting,  has  repeatedly  been  treated  as  a  waiver  of  the  written  in- 
dorsement. In  New  Orleans  Ass'n  vs.  Griffen  (15  Ins.  Law  Jour.,  303) 
verbal  consent  of  such  an  agent,  with  knowledge  that  it  would  be  acted 
on,  was  held  to  be  a  waiver.  In  Kitchen  vs.  Ins.  Co.  (14  Ins.  Law 
Jour.,  594)  and  in  Security  Ins.  Co.  vs.  Fay  (22  Mich.,  467)  it  was 
held  that  the  acquiescence  of  the  mere  solicitor  in  the  obtaining  of  other 
insurance  was  sufficient  under  the  circumstances  to  estop  the  company 
from  setting  up  the  policy-violation  ;  and  while  the  ordinary  rule  re- 
quires the  agent  to  be  one  authorized  to  grant  insurances,  these  cases 
serve  to  show  the  dangerous  results  which  may  flow  from  the  conduct, 
even  of  a  solicitor,  where  the  application  itself  contains  no  provision  on 
the  subject.  Ordinarily,  notice  of  other  insurance  to  a  solicitor  is  not 
notice  to  the  company. 

Heath  vs.  Ins.  Co.,  58  N.  H.  See  also  Collins  vs.  Ins.  Co.,  8  Ins.Law  Jour.,  453; 
Roberts  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  248;  "Westchester  Ins.  Co.  vs.  Earle,  5  Ins. 
Law  Jour. ,  61;  Pechner  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  782,  and  cases  there  cited. 

The  agent,  therefore,  cannot  be  too  careful  when  he  has  knowledge  of 
other  insurance,  either  subsisting  or  intended.  Mere  silence  or  inaction 
on  his  part  may  serve  to  defeat  the  policy-provision.  The  insured 
should  be  prompdy  informed  that  consent  must  be  indorsed,  and  until 
the  indorsement  is  made,  the  consent  should  be  withheld. 

Schenck  vs.  Ins.  Co.,  24  N.  J.,  447;  Hayward  vs.  Ins.  Co.,  2  Ins.  Law  Jour.,  503; 
Viele  vs.  Ins.  Co.,  26  Iowa,  55. 

One  class  of  cases  in  this  connection  calls  for  a  separate  notice.  The 
agent  frequently  acts  for  more  than  one  company,  and  distributes  the 
risk  among  them,  or,  when  it  is  objected  to  by  one,  cancels  the  policy 
and  places  it  in  another.  Failure  to  act  in  accordance  with  strict  busi- 
ness principles  under  such  circumstances  has  occasioned  no  little  liti- 
gation. From  the  very  nature  of  the  case,  the  agent  has  knowledge  of 
the  other  insurance  in  respect  to  each  policy,  and  a  failure  to  indorse  it 
will  not  defeat  the  contract,  though  the  applicant  neglects  on  his  part  to 
mention  the  -fact  in  his  application. 

Brandup  vs.  Ins.  Co.,  10  Ins.  Law  Jour.,  228,  and  cases  there  cited. 


66 

So,  in  regard  to  cancellation  and  transfer  of  the  risk,  the  agent  should 
remember  that  even  though  free  to  elect  the  company  in  the  first  place, 
after  having  once  elected  and  made  a  binding  contract  in  one,  he  is  not 
thereafter  free  to  shift  the  risk  to  another,  except  in  the  manner  stipu- 
lated in  the  contract  by  due  notice  to  the  insured  and  cancellation  of 
the  first  policy,  and  when  so  canceled  and  the  consent  of  the  insured  ob- 
tained, it  should  be  promptly  bound  in  the  second  company. 
Poor  vs.  Ins.  Co.,  9  Ins.  Law  Jour.,  428;  ^tna  Ins.  Co.  vs.  Maguire,  51  111.,  342,. 

Vacancy, 

Few  questions  have  occasioned  more  controversy  in  the  courts  than 
vacancy.  All  policies  expressly  stipulate  against  it.  In  the  case  of  special 
hazards  particular  inquiries  are  usually  made  on  this  subject.  The  reason 
is  obvious.  Vacant  buildings  have  always  furnished  the  strongest  tempta- 
tion for  the  malicious  incendiary's  torch.  A  violation  of  the  policy-pro- 
vision against  vacancy  is  uniformly  admitted  to  be  a  breach  of  contract 
which  will  work  a  forfeiture  ;  the  vital  question  has  been  as  to  what  con- 
stituted such  vacancy.  Often  the  premises  are  described  as  "occupied 
as  a  residence"  or  "  occupied  by  tenants."  Such  statements,  while  they 
must  be  true  as  regards  existing  conditions,  are  not  in  themselves  war- 
ranties that  the  occupancy  shall  continue,  and  should  never  be  relied^on 
for  that  purpose. 

Hartford  Ins.  Co.  vs.  Smith,  7  Ins.  Law  Jour.,  140  ;  Woodruff  vs.  Ins.  Co.,  10  Ins. 
Law  Jour.,  125  ;  Imperial  Ins.  Co.  vs.  Kiernan,  15  Ins.  Law  Jour.,  352. 

Every  temporary  non-occupancy  of  a  building  or  of  insured  premises 
is  not  regarded  as  a  vacancy  by  the  courts.  The  question  depends  upon 
the  language  of  the  prohibition  and  the  character  of  the  risk,  as  well  as 
the  extent  and  duration  of  the  abandonment.  Thus  in  Cummings  vs. 
Ins.  Co.  (6  Ins.  Law  Jour.,  135)  a  distinction  was  made  between  an  or- 
dinary provision  against  vacancy  and  one  that  provided  against  a  vacancy 
by  the  removal  of  the  occupant,  which  latter  referred  only  to  a  permanent 
abandonment,  A  dwelling  is  assumed  to  be  continuously  occupied  as  a 
place  of  residence.  When  it  fails  to  comply  with  this  description,  it  is 
vacant.  Frequently  the  house  is  closed  for  a  longer  or  shorter  time, 
through  the  temporary  absence  of  the  family  for  a  brief  sojourn  else- 
where ;  the  courts  will  not  always  regard  such  absences  as  a  policy-viola- 
tion, especially  if  a  servant  remains  on  the  premises.  But  any  prolonged 
absence  and  closing  of  a  dwelling  is  liable  to  be  fatal  to  the  insurance. 
The  mere  fact  of  occasional  visits  or  of  a  general  supervision  by  some 
person  in  the  neighborhood  is  not  sufficient.  All  cases  where  a  residence 
is  thus  vacated  for  any  length  of  time  should  be  treated  as  a  case  of  va- 


67 

canq^  for  which  consent  must  be  obtained.  Thus  in  Ins.  Co.  vs.  Race 
{15  Ins.  Law  Jour.,  633)  it  appeared  that  while  the  owner  was  tempo- 
rarily absent  his  wife  abandoned  the  dwelling  and  himself.  It  appeared 
that  the  house  was  frequently  visited  by  members  of  the  family  for  the 
purpose  of  looking  after  the  furniture,  and  a  servant  generally  slept  there 
at  night,  but  there  were  no  fires  lighted  nor  any  of  the  usual  signs  of  oc- 
cupancy. This  was  held  by  the  court  to  be  a  violation  of  the  policy. 
So  in  Herman  vs.  Ins.  Co.  (10  Ins.  Law  Jour.,  743)  a  summer  residence, 
which  was  annually  occupied  during  the  season,  was  looked  after  by  a  servant 
and  his  family,  who  lived  in  an  adjacent  house  on  the  same  grounds,  but  it 
was  held  to  be  vacant  within  the  policy.  In  Ins.  Co.  vs.  Padfield  (78  111., 
167)  the  court  said  with  regard  to  this  condition  :  "A  fair  and  reasonable 
construction  of  the  language  vacant  and  unoccupied  is  that  it  should  be 
without  an  occupant,  without  any  person  living  in  it ;  not  technical  oc- 
cupation, but  as  popularly  understood  and  used."  The  mere  presence 
of  furniture,  therefore,  coupled  with  a  general  oversight,  should  not  be 
regarded  as  an  occupancy  in  case  of  a  building  used  for  dwelling  pur- 
poses. 

The  question  of  vacancy  in  this  class  of  risks  is  most  likely  to  arise 
through  an  abandonment  by  the  tenant  or  a  change  of  tenancy,  when  an 
interval  longer  or  shorter  is  apt  to  occur  during  which  the  property  is  not 
occupied.  There  is  considerable  disagreement  between  the  courts  as  to 
the  effect  of  such  changes  and  removals.  Where  the  property  is  known 
to  be  used  for  renting,  and  where  the  owner  is  ignorant  of  the  abandon- 
ment, they  are  disposed  to  be  more  lenient.  The  language  of  the  policy, 
too,  will  have  much  to  do  in  deciding  the  question.  A  provision  that  it 
shall  not  be  and  remain  unoccupied  would  be  looked  on  as  excusing 
such  a  brief  vacancy  as  was  incidental  to  a  change  of  tenants.  A  pro- 
vision, on  the  contrary,  restricting  the  vacancy  to  five  days  would  be  re- 
garded as  absolute.  The  safe  and  proper  rule  is  to  regard  the  property 
as  vacant  the  moment  it  ceases  to  be  occupied  by  parties  living  on  the 
premises,  no  matter  how  brief  the  non-occupancy.  The  fact  that  another 
tenant  is  preparing  to  occupy,  or  that  an  effort  is  being  made  to  secure 
such  a  tenant,  or  even  that  a  portion  of  the  furniture  has  been  placed  in 
the  house,  should  not  be  regarded  as  an  occupancy.  Thus  in  American 
Ins.  Co.  vs.  Padfield  (4  Ins.  Law  Jour.,  893)  the  tenant  had  left,  but  a 
few  articles  of  furniture  remained,  and  it  was  held  that  mere  legal  pos- 
session was  not  occupancy.  In  ^Etna  Ins.  Co.  vs.  Meyer  (8  Ins.  Law 
Jour.,  249)  the  tenants  had  left  four  days  previous,  but  others  were  to  move 
in  as  soon  as  repairs  were  completed.  But  it  was  held  that  even  a  tempo- 
rary vacancy  forfeited  the  policy.     In  Dennison  vs.  Ins.  Co.  (9  Ins.  Law 


68 

Jour.,  65)  a  tenant,  whose  lease  had  not  expired,  moved  out  about  two 
weeks  before  the  fire  ;  and  in  McCIure  vs.  Ins.  Co.  the  tenant  had  moved 
without  the  knowledge  of  the  insured,  who,  immediately  upon  learning 
of  the  fact,  sought  to  secure  another  tenant,  but  in  neither  case  was  the 
vacancy  held  to  be  excused.  In  Bennett  vs.  Ins.  Co.  (12  Ins.  Law  Jour., 
569)  the  tenant  had  moved  out  only  two  hours  before  the  fire,  but  it  was  held 
to  be  a  case  of  vacancy.     In  other  cases  the  courts  have  been  more  liberal. 

See  also  Cook  vs.  Ins.  Co.,  9  Ins.  Law  Jour.,  887  ;  Kelley  vs.  Ins.  Co.,  5  Ins.  Law 
Jour.,  134  ;  Cummins  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  135. 

On  the  other  hand,  if  the  risk  is  of  a  character  which  involves  only  the 
presence  of  persons  at  stated  times  or  intervals,  or  only  an  occasional 
employment  for  special  purposes,  the  term  occupancy  has  a  very  dif- 
ferent meaning.  Such  a  building  is  occupied  while  in  a  general  sense 
in  use  in  the  manner  contemplated.  A  barn  intended  simply  for  stor- 
ing grain  in  winter,  or  a  smoke-house  for  curing  at  certain  seasons, 
is  not  vacant  because  it  is  not  in  active  use  at  another  season  of 
the  year.  But  it  is  obvious  that  the  mere  term  "  barn "  would  not 
suggest  to  the  underwriter  such  an  occasional  use  ;  therefore,  all  risks 
of  this  character,  whose  names  do  not  import  technical  vacancies,  should 
be  particularly  described  as  occupied  only  in  such  a  way.  In  Ashworth 
vs.  Ins.  Co.  (112  Mass.,  423)  the  insurance  was  on  a  dwelling  and  a 
bam  on  the  premises,  and  the  court  said  that  occupancy  as  applied  to 
such  buildings  implies  such  use  of  the  barn  as  is  ordinarily  incident 
to  a  barn  belonging  to  an  occupied  house,  or  at  least  something  more 
than  for  mere  storage.  In  a  recent  case  before  the  Supreme  Court  of 
Iowa,  the  subject  of  insurance  was  a  hog-house,  which  had  not  been 
used  for  that  purpose,  however,  for  some  time.  The  owner  lived  in 
his  house  near  by,  and  it  did  not  appear  that  there  had  been  any 
actual  abandonment  of  the  use.  The  court  held  that  there  was 
no  vacancy,  though  the  fact  that  it  was  temporarily  unused  probably 
increased  the  risk.  In  Williams  vs.  Ins.  Co.  (14  Ins.  Law  Jour.,  708) 
an  elevator  had  been  sold  under  foreclosure,  the  property  was  idle  at 
the  time  of  fire,  but  for  years  it  had  only  been  used  at  irregular  inter- 
vals, but  men  were  around  there  all  the  time,  and  there  was  no  evi- 
dence of  an  intention  to  abandon  its  use  as  an  elevator.  Under  these 
circumstances  the  court  held  that  it  was  not  vacant.  In  both  of  these 
latter  c^ses  dispute  would  have  been  obviated  had  the  company  been 
informed  concerning  the  real  character  of  the  occupancy. 

Factories  more  than  any  other  class  of  risks  except  dwellings,  have 
occasioned  disputes  as  to  what  constitutes  occupancy.  During  seasons 
of  dull  times,  strikes,  or  on  account  of  financial  embarrassments,  active 


69 

work  is  likely  to  be  suspended  for  a  longer  or  shorter  time.  Often 
such  suspensions  are  of  a  character  that  amounts  to  at  least  a  tem- 
porary abandonment  of  the  care  and  oversight  of  the  premises,  pro- 
ducing, so  far  as  the  underwriter  is  concerned,  all  the  evils  of  a 
permanent  abandonment.  Hence,  stipulations  are  frequently  incorpo- 
rated in  the  policy,  involving  forfeiture  if  it  ceases  to  be  operated  for 
more  than  a  specified  number  of  days,  and  in  such  case,  of  course,  a 
violation  will  incur  the  penalty.  But  when  no  such  express  limitation  is 
made,  if  the  temporary  non-use  of  premises  is  such  as  might  be  regarded 
as  a  natural  incident  of  the  business,  the  courts  are  apt  to  regard  it 
with  leniency.  Thus  in  Whitney  vs.  Ins.  Co.  (7  Ins.  Law  Jour.,  477) 
through,  the  breaking  of  machinery  and  other  causes  work  in  a  saw- 
mill had  been  interrupted  at  intervals  for  several  months,  and  no 
work  had  been  done  for  sixteen  days  before  the  fire,  but  the  lumber 
was  on  hand  to  continue  the  business,  and  k  was  held  to  be  no  vacancy. 
The  court  said:  "Occupation  of  a  dwelling-house  is  living  in  it 
But  people  do  not  live  in  a  saw-mill.  In  Keith  vs.  Ins.  Co.  (10  Allen, 
531)  the  plaintiff  closed  up  a  trip-hammer  shop,  and  it  was  held  to 
be  vacant.  A  shop  of  that  kind  ordinarily  has  people  working  in  it 
on  every  working  day.  A  saw-mill  is  different.  If  a  custom  mill,  it 
must  depend  on  the  logs  brought  to  it  for  business.  In  any  case 
when  driven  by  water-power  it  must  rely  on  the  supply  of  water,  and 
must  be  idle  when  that  fails."  In  the  case  of  Keith  referred  to,  the 
shop  had  not  been  actively  used  for  more  than  thirty  days,  but  the 
tools  were  all  there  and  it  was  visited  every  day  to  see  that  all  was 
right.  Yet  this  was  not  occupancy.  Again,  in  American  Ins.  Co.  vs. 
Foster  (9  Ins.  Law  Jour.,  268),  property  insured  as  a  school-house  was 
afterwards  abandoned  for  that  purpose  and  used  as  a  dwelling,  and  it 
was  held  that  the  utmost  which  could  be  claimed  under  the  policy 
was  a  brief  temporary  vacancy,  such  as  is  usual  in  school-houses. 
Neither  as  a  dwelling  nor  school  could  a  vacancy  of  several  months 
be  allowed. 

It  will  thus  be  seen  that  in  case  of  those  risks  which  are  ^ised  only 
for  business  or  manufacturing  purposes,  the  safe  rule  requires  that  any 
prolonged  non-use,  which  is  not  an  ordinary  incident  of  the  hazard, 
should  be  treated  as  a  vacancy  for  which  consent  must  be  obtained. 
The  ordinary  stipulation  regarding  occupancy  has  been  held  to  refer 
simply  to  insurances  on  a  building,  but  where  personal  property  only 
is  the  subject,  it  is  obvious  that  vacancy  may  sometimes  be  equally  im- 
portant. Therefore,  in  such  case,  it  is  safer  to  stipulate  against  the 
premises  containing  the  insured  property  becoming  vacant. 

Carr  vs.  Ins.  Cos.,  13  Ins.  Law  Jour.,  443. 


70 
Prohibited  Risks. 

All  policies  expressly  prohibit  the  keeping  or  storing  on  the  premises 
of  certain  articles  which  experience  has  shown  to  be  incendiary  in 
their  character,  like  gunpowder  and  explosive  oils,  and  a  violation  will 
forfeit  the  insurance.  But  it  frequently  happens  that  the  nature  of  the 
risk,  or  the  ordinary  method  of  using  the  property,  is  such  as  to  involve 
to  some  extent  the  presence  of  the  prohibited  article.  The  sale  of  coal- 
oils  and  gunpowder  is  often  a  part  of  the  regular  business  of  a  store- 
keeper, the  use  of  naphtha  or  benzine  may  be  an  essential  part  of  a 
business,  or  the  keeping  of  a  limited  amount  of  kerosene  necessary  for 
lighting  the  dwelling.  Hence,  numerous  disputes  have  arisen  as  to 
how  the  prohibition  must  be  interpreted  in  those  cases  where  the  written 
description  of  the  risk  itself  might  seem  to  imply  a  consent  to  keep  the 
forbidden  article ;  hence,  too,  the  importance  of  particular  inquiries  by 
the  agent  in  all  cases  where  there  is  reason  to  suppose  that  a  prohibited 
article  may  be  innocently  used  or  kep 

The  mere  presence  in  minute  quantities  of  a  forbidden  article  is  not 
necessarily  a  violation.  The  amount  must  be  sufficient  to  violate  the 
spirit  of  the  prohibition.  Just  what  is  such  an  amount  is  a  difficult 
question  to  determine.  In  Wheeler  vs.  Ins.  Co.  (8  Ins.  Law  Jour.^ 
318)  it  was  held,  that  keeping  a  burning-fluid  in  the  limited  quantity 
needed  for  filling  lamps  was  not  a  violation,  where  its  use  for  light  was 
not  expressly  prohibited.  In  Mears  vs.  Ins.  Co.  (9  Ins.  Law  Jour., 
139)  the  bringing  of  a  small  quantity  of  benzine  on  the  premises  on  a 
single  occasion  for  cleaning  machinery  was  not  a  violation.  In  Bayly  vs. 
Ins.  Co.  (4  Ins.  Law  Jour.,  503)  a  small  quantity  of  saltpetre  kept  to 
cure  meat  in  a  store  was  held  not  to  be  sufficient  in  amount  to  be  a  sub- 
stantial violation.  In  Winans  vs.  Ins.  Co.  (5  Ins.  Law  Jour.,  203)  and 
in  Bennett  vs.  Ins.  Co.  (9  Ins.  Law  Jour.,  585)  the  knowledge  of  the 
agent  that  coal-oils  were  used  for  lighting  excused  the  violation.  On 
the  other  hand,  in  Matson  vs.  Ins.  Co.  the  use  of  kerosene  for  lighting 
where  expressly  prohibited,  and  in  Wheeler  vs.  Ins.  Co.  (12  Ins.  Law 
Jour.,  83^)  a  barrel  of  naphtha  brought  to  a  mill  for  destroying  moths, 
were  both  held  to  be  violations.  It  will  thus  be  seen  that  the  presence  of 
a  prohibited  article,  even  in  limited  quantities,  is  liable  to  be  a  ground  of 
dispute  and  may  result  in  forfeiture.  If  known  by  the  agent,  he  should 
charge  a  rate  commensurate  with  the  hazard  and  give  consent  for  its 
use,  or  he  should  decline  the  risk,  as  the  case  might  be. 

It  frequently  happens  that  inflammables  of  the  same  general  character 
and  equally  dangerous  are  used,  but  which  are  somewhat  different  in 
their  composition  from  those  forbidden,  or  they  are  kept  on  the  premises 


7X 

a  short  distance  away.  Thus  in  Sperry  vs.  Ins.  Co.  (15  Ins.  Law  Jour., 
270)  dynamite  was  kept,  this  was  held  to  be  a  violation  of  the  provision 
against  nitro-glycerine.  On  the  other  hand,  in  Mosely  vs.  Ins.  Co.  (13 
Ins.  Law  Jour.,  97)  it  was  left  to  a  jury  to  say  whether  turpentine  was  an 
explosive,  and  in  Willis  vs.  Ins.  Co.  (8  Ins.  Law  Jour.,  449)  whether 
alcohol  was  an  explosive.  In  Carlin  vs.  Ins.  Co.  (12  Ins.  Law  Jour., 
388)  the  petroleum  was  kept  in  an  adjoining  engine-room,  and  there- 
fore was  held  not  to  be  on  the  premises.  In  Hicks  vs.  Ins.  Co.  (8  Ins. 
Law  Jour.,  320)  it  was  left  for  a  jury  to  say  whether  mineral  sperm-oil 
was  included  in  a  provision  against  kerosene.  In  all  these  cases  the 
spirit  of  the  prohibition  was  violated,  if  not  the  letter. 

See  also  Bennett  vs.  Ins.  Co.,  9  Ins.  Law  Jour.,  585  ;  Mears  vs.  Ins.  Co.,  8  Ins.  Law 
Jour.,  139. 

But  the  cases  most  frequently  before  the  courts  and  requiring  the  most 
careful  inquiry  by  the  agent,  are  those  where  a  prohibited  article  is  kept 
as  a  part  of  a  regular  stock-in-trade.  Country  store-keepers  are  especially 
apt  to  deal  in  dangerous  combustibles  and  explosives.  Sometimes  the 
language  of  the  policy  is  so  explicit  that  a  forfeiture  is  the  result,  but  in 
many  cases  the  description  of  the  property  as  **  his  stock  as  a  country 
store-keeper,"  has  been  held  to  amount  to  a  tacit  consent  to  keep  such 
articles.  In  Wheeler  vs.  Ins.  Co.  (15  Ins.  Law  Jour.,  184),  it  was  held 
that  insurance  on  a  woolen-mill  implies  a  knowledge  that  naphtha  was 
necessarily  used  in  the  business.  In  Collins  vs.  Ins.  Co.  (8  Ins.  Law 
Jour.,  453)  the  presence  of  saltpetre  was  excused  because  it  was  an 
article  usually  kept  in  drug-stores.  But  in  Portsmouth  Ins.  Co.  vs. 
Brinckley  ( 2  Ins.  Law  Jour.,  842),in  Whitmarshvs.  Ins.  Co.  (2  Allen,  581), 
and  in  Steinbach  vs.  Ins.  Co.  (13  Wal.  ,183)  the  courts  refused  to  recognize 
this  doctrine,  and  insisted  that  a  distinct,  printed  prohibition  could  not 
be  overcome  by  insuring  in  general  terms  a  line  of  goods  which  might 
by  custom  contain  the  forbidden  article.  The  last-named  case  was  in  the 
United  States  Supreme  Court,  and  it  was  there  held  that  an  insurance  on 
fire-crackers  and  * '  other  articles  in  his  line  of  business  "  would  not  cover 
a  forbidden  article  even  so  closely  allied  as  fire-works. 

In  all  cases,  therefore,  where  prohibited  articles  are  included  among 
the  subjects  of  insurance,  special  consent  should  be  obtained  and  paid 
for,  or  the  insured  should  be  notified  that  their  presence  is  likely  to  forfeit 
the  insurance.  The  use  of  gas-machines  within  or  too  near  premises,  con- 
trary to  provisions  in  the  policy,  has  been  a  frequent  source  of  litigation, 
and  should  be  carefully  looked  after. 

Winans  vs.  Ins.  Co.,  5  Ins.  Law  Jour.,  203 ;  Arkell  vs.  Ins.  Co.,  6  Ins.  Law  Jour., 
251;   N.  W.  Mut.  Life  Ins.  Co.  vs.  Ins.  Co.,  40  Wis.,  446. 


72 

Alterations  and  Repairs. 

Trifling  repairs  from  time  to  time  are  essential  to  the  preservation  of 
the  property,  they  are  incidental  to  the  risk,  and  the  courts  regard  the 
insured  as  entitled  to  make  them  without  the  company's  consent,  so  long 
as  they  are  only  such  ordinary  repairs  as  are  needed  to  every  building. 
Tinners  may  repair  a  leaky  roof,  plumbers  may  stop  leaks  or  remove  ob- 
structions in  pipes,  and  painters  may  renew  the  paint,  though  the  tools 
employed  by  each  slightly  increase  the  hazard  for  the  time  being. 

Townsend  vs.  Ins.  Co.,  i8  N.  Y.,  i68;  Ottawa  Co.  vs.  Ins.  Co.,  28U.C.  Q.  B.,  518; 
Dom  vs.  Ins.  Co.,  5  Ins.  Law  Jour.,  183;  James  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  9; 
O'Neil  vs.  Ins.  Co.,  3  N.  Y.,  122. 

But  it  is  important  to  note  that  such  repairing  must  be  restricted  to 
that  which  is  ordinary  and  of  no  great  magnitude.  The  moment  these 
operations  become  extensive  in  their  character,  even  though  they  are 
necessary,  the  insurer  has  a  right  to  object  on  account  of  the  increase  of 
risk  which  the  policy  prohibits.  Even  in  the  absence  of  a  distinct  pro- 
hibition against  repairs,  if  it  can  be  shown  that  the  risk  was  materially  in- 
creased thereby,  forfeiture  may  result,  especially  if  a  loss  can  be  traced  to 
this  cause,  and  the  repairs  were  extensive  in  their  character. 

Curry  vs.  Ins.  Co.,  10  Pick.,  535. 

All  substantial  alterations  of  a  building  are  looked  on  by  the  compa- 
nies as  an  mcrease  of  risk.  Where,  as  so  often  happens,  such  alterations 
effect  an  increase  in  the  size  of  the  original  structure,  insurers  properly 
regard  the  risk  as  one  which  was  not  contemplated  in  the  contract,  and 
a  loss-claim  is  likely  to  be  resisted  whether  resulting  from  this  cause  or 
not.  Thus  in  Lyman  vs.  Ins.  Co.  (14  Allen,  329)  it  was  held  that  a  de- 
liberate, considerable  alteration  not  incidental  to  the  ordinary  use  of  the 
building,  and  prolonged  for  three  weeks,  increasing  the  risk  at  the  time 
of  the  fire,  although  not  permanently,  nor  causing  the  fire,  avoids  the 
policy.  The  policy  itself  usually  stipulates  against  material  alterations  or 
repairs,  or  restricts  them  to  such  as  can  be  done  within  a  limited  time, 
and  any  excess  of  this  limit  will  work  a  forfeiture. 

To  avoid  controversy,  therefore,  consent  should  be  obtained  for  all  ma- 
terial alterations  or  repairs  beyond  such  as  are  expressly  permitted  by  the 
contract. 

Increase  of   Risk  Generally. 

There  are  many  other  ways  besides  those  heretofore  referred  to  in 
which  a  risk  may  be  increased  in  violation  of  the  policy.  Any  important 
modification  whatever  of  the  hazard  which  makes  it  essentially  different 


73 

in  character  from  that  which  was  originally  assumed  and  which  materi- 
ally increases  the  danger  from  fire,  should  be  looked  on  as  an  increase  of 
risk.     The  courts  ask  two  prominent  questions  on  this  subject — has  the 
risk  been  modified  or  altered  in  a  way  not  contemplated  in  the  original 
contract,  and  is  the  alteration  one  which,   if  known,   would  have   been 
likely  to  call  for  an   increased  premium  or  to  have  induced  a  cancella- 
tion ?   Whatever  changes  suggest  an  affirmative  answer  to  these  questions, 
whether  in  the  manner  of  use  or  occupancy,   in  the  arrangements   or 
character  of  the  subject,  or  in  its  surroundings,  should  be  treated  as  an 
increase  of  risk  about  which  the  insurer  is  entitled  to  information.     In 
Daniels  vs.  Ins.  Co.  (12  Ins.  Law  Jour.,   379)  the  court  pronounced  the 
presence   of  a  stove  in  a  finishing-room,   where  there  was  frequently  a 
large  quantity  of  inflammable  naphtha-gas,  a  manifest  increase  of  risk. 
So,  in  Osterloh  vs.  Ins.   Co.  (13  Ins.   Law  Jour.,   475),  a  pipe  had  been 
thrust  through  the  ceiling  and  roof  in  contravention   of  the  policy  re- 
quirements,  which   would   have  resulted    in  forfeiture   had  it  not  been 
waived  by  the  company.     In  Cole  vs.  Ins.  Co.  (14  Ins.  Law  Jour.,  453) 
the  court  declared  that  the  erection  of  a  wooden  drying-house  one  story 
high,  fourteen  feet  from  a  brick  planing-mill,  and  heated  by  steam  from 
a  boiler  in  the  main  building,  was  a  self-evident  increase  of  risk.     In 
Long  vs.  Beeber  (14  Ins.  Law  Jour.,   622)   a  steam-thresher  was   tem- 
,  porarily  located  in  an  adjacent  barn,  and   it  was  held  that,  even  though 
done  by  a  tenant  without  the  knowledge  of  insured,  if  the  risk  was  in- 
creased the  policy  was  avoided.     The  court  used  the  following  language : 
"  The  company  for  a  fixed  price   insured  the  building  as  it  was  at  the 
date  of  the  policy.     It  took  upon  itself  that  hazard  and  none  other;  and 
to  avoid  all  dispute  as  to  what  it  did  insure,  the  condition  was  introduced 
that  if  the  risk  was  increased  by  the  erection  or   occupation  of  neigh- 
boring buildings,   or  by  any  means  whatever,  without  the  assent  of  the 
company,  the  policy  should  be  void,  and  subject  to  this  condition  the 
plaintiff  accepted   this  policy.     There  is  no  doubt  whatever   about  the 
binding  character  of  this  contract,  and  if  the  insured  did  in  fact,  without 
the  assent  of  the  insurer,    either  by  himself  or  tenant,  do  anything  to 
increase  the  risk,  the  contract  was  violated,  and  he  must  suffer  the  con- 
sequences."    The  principle  here  laid  down  should  govern  the  agent  in 
judging  whether  there  has  been  an  increase  of  risk.     In  Francis  vs.  Ins. 
Co.  (25  N.  J.,  78)  a  somewhat  similar  provision  was  violated  by  erecting 
a  small  addition  to  the  insured  store  in  which  was  placed  a  quantity  of 
hay  for  a  cow.     The  hay  took  fire,  and  the  court  declared  as  a  matter  of 
law  that  the  policy  was  forfeited. 

Another  important  phase  of  this  question  was  well  illustrated  in  the 


74 

case  of  Washington  Ins.  Co  vs.  Davison,  30  Md.,  91.  The  insurance 
was  on  a  sulphuric-acid  factory;  in  point  of  fact,  nitric  as  well  as  sul- 
phuric acid  was  manufactured.  The  premises  had  been  inspected  by  the 
agent,  and  the  court  declared  that  in  writing  such  a  risk  the  insurer 
should  have  known  that  the  manufacture  of  nitric  acid  was  necessary  as  a 
part  of  the  process.  The  incapacity  of  the  inspector  would  form  no  de- 
fense. In  other  words,  whatever  obvious  features  of  the  business  are 
likely  to  involve  an  increase  of  risk  beyond  that  which  is  apparently  as- 
sumed in  the  mere  description,  should  be  noted  by  the  agent 

Concurrency  in  Policy-writing. 

The  greatest  difficulty  encountered  by  the  companies  in  adjusting  loss- 
claims,  aside  from  agreeing  with  the  claimant  as  to  the  actual  amount  of 
damages,  has  arisen  through  non-concurrency,  as  it  is  termed,  of  the 
various  policies  covering  the  property.  One  policy  sometimes  contains 
stipulations,  such  as  co-insurance,  or  three-quarter  loss  or  value  clauses, 
limiting  the  liability,  which  are  absent  from  another.  Frequently  one 
policy  covers  one  or  more  items  not  included  in  the  other,  without  spe- 
cifically limiting  its  liability  on  each  ;  or  one  may  be  a  floating  policy,  as 
in  the  case  of  railroad  insurance,  while  another  may  insure  a  specific 
sum  on  the  property  destroyed.  One  may  cover  only  a  single  interest, 
and  another  include  several  interests.  One  may  be  liable  for  any  actual 
damages,  and  another  only  for  damages  in  excess  of  a  certain  amount. 

In  all  such  cases  the  great  difficulty  is  to  determine  as  between  the 
companies  what  proportion  of  the  loss  each  one  should  bear.  All  policies 
now  contain  the  contribution-clause,  which  restricts  each  company  to  its 
pro-rata  share  of  the  loss,  and  various  rules  have  been  adopted  by  under- 
writers and  laid  down  by  the  courts  for  determining  in  such  cases  how 
the  pro-rata  is  to  be  computed.  But  the  companies  are  far  from  being 
harmonious  as  to  what  rules  are  correct ;  while  the  courts  have  generally 
contented  themselves  with  framing  a  doctrine  which  shall  seem  most 
equitable  in  the  particular  case  before  them,  regardless  of  its  want  of 
equity  under  other  conditions.  In  fact,  neither  law  nor  mathematics  fur- 
nishes any  precise  general  rules  of  equitable  apportionment  which  are  ap- 
plicable to  all  cases  of  non-concurrency.  But  the  courts  do  insist  that 
the  insured  shall  recover  the  largest  amount  to  which  he  would  be  entitled 
under  any  fair  construction  of  the  contracts,  regardless  of  any  want  of 
equity  in  its  apportionment  among  the  companies. 

Royal  Ins.  Co.  vs.  Roedel,  4  Ins.  Law  Jour.,  840  ;  Robbins  vs.  Ins.  Co.,  Hine  & 
Nichols'  Dig.,  170  ;  Angelrodt  vs.  Ins.  Co.,  31  Mo.,  593  ;  Haley  vs.  Ins.  Co.,  12 
Gray,  349  ;  Blake  vs.  Ins.  Co.,  12  Gray,  265  ;  Bardwell  vs.  Ins.  Co.,  6  Ins.  Law 
Jour.,  413. 


75 

The  consequence  is  that  where  the  policies  are  non-concurrent,  not 
only  are  the  companies  liable  to  be  involved  in  disputes  among  themselves, 
but  those  whose  contracts,  owing  to  the  absence  of  limitations,  can  be 
construed  to  afford  the  largest  indemnity,  are  likely  to  be  saddled  with 
the  largest  proportion  of  the  loss.  In  Sherman  vs.  Ins.  Co. ,  cited  above, 
one  company  insured  on  live-stock  simply,  while  another  limited  its  lia- 
bility on  any  one  animal  to  a  specific  sum;  the  consequence  was  that, 
though  both  policies  were  for  nearly  the  same  amount,  the  second  com- 
pany escaped  with  less  than  half  the  liability  of  the  first.  In  Carlwitz  vs. 
Ins.  Co.  (i2  Ins.  Law  Jour.,  127)  the  policy  was  written  for  specific 
amounts  on  various  items,  on  some  of  which  the  loss  was  heavy  and  on 
others  none  ;  and  the  court  instructed  that  the  claimant  could  only  look 
in  such  a  case  for  indemnity  to  the  particular  fund  intended  to  indemnify 
the  property;  an  excess  of  loss  on  one  item  could  not  be  made  good'from 
the  surplus  on  another,  thus  showing  the  great  advantage  to  the  company 
of  specific  insurances.  In  Angelrodt  vs.  Ins.  Co.,  supra,  one  policy  in- 
cluded other  interests  besides  those  covered  by  the  first  policy ;  a  lower 
court  had  made  an  apportionment  of  the  loss  between  the  two,  which  the 
appellate  court  declared  to  be  correct,  if  it  had  fully  indemnified  the 
insured  ;  but  failing  in  this  another  rule  must  be  adopted  which  would 
furnish  the  indemnity.  The  addition  of  another  interest  to  the  second 
policy  compelled  a  larger  contribution  from  the  first,  notwithstanding  it 
Vas  specific. 

These  cases,  to  which  others  might  be  added,  show  the  importance, 
first,  of  making  the  policy-writing  as  specific  both  in  regard  to  the  prop- 
erty and  interests  as  the  circumstances  will  allow;  second,  of  insisting 
that  where  a  certain  amount  of  other  insurance  is  a  condition,  such  other 
insurance  shall  be  likewise  specific ;  third,  of  having  other  insurance 
concurrent  both  as  to  the  interests  and  property  covered  and  as  to  lim- 
itations of  any  kind  on  the  liabilities.  The  company  that  insures,  for  in- 
stance, without  a  co-insurance  clause  is  at  a  disadvantage,  if  this  clause 
exists  in  other  insurance  on  the  same  properly.  Not  only,  therefore, 
should  the  agent  carefully  inquire  regarding  the  amount  of  other  insur- 
ance on  the  property,  but  with  regard  to  its  apportionment  and  limita- 
tions, and,  if  authorized  to  contract,  should  seek  to  so  frame  his  own  pol- 
icy that  his  company  will  not  suffer  through  non-concurrency. 

Printed  forms,  if  properly  constructed,  are  desirable  so  far  as  resulting 
concurrency  is  concerned.  Printed  forms,  however,  are  liable  to  be  got- 
ten up  too  much  in  the  interest  of  the  insured,  but  whether  printed  or 
written,  all  the  policies  on  the  same  risk  should  read  alike. 


76 

Indorsements  and    Modifications  by  the  Agent. 

Agents  who  are  authorized  to  contract  are  usually  permitted  by  law  to 
consent  to  such  subsequent  minor  modifications  of  the  contract  as  they 
might  have  made  in  the  first  instance  where  the  instrument  itself  does  not 
forbid  their  doing  so,  and  where  the  modifications  might  reasonably  be 
supposed  to  be  within  the  scope  of  their  powers. 

Pitney  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  765;  Pechner  vs.  Ins.  Co.,  4  Ins.  Law 
Jour.,  782,  and  cases  there  cited. 

But  this  power  is  never  intended  to  be  applied  to  the  printed  portion 
of  the  policy,  which  frequently  contains  stipulations  forbidding  it ;  and 
in  those  States  which  have  standard-policy  laws,  such  a  tampering  with 
the  printed  portion  would  be,  as  stated  elsewhere,  a  penal  offense  against 
the  statute.  Particularly  should  an  agent  avoid  the  dangerous  assump- 
tion of  verbal  agreements  to  modify  the  policy  ;  whatever  changes  in  or 
additions  to  the  written  portion  may  be  asked  for  should  be  carefully 
considered,  reduced  to  writing,  indorsed  on  the  policy,  and  reported  to 
the  company.  It  is  a  sound  legal  principle  that  verbal  evidence  cannot 
be  admitted  to  alter  the  terms  of  a  written  instrument,  and  in  case  of  dis- 
pute it  is  only  by  a  legal  subterfuge  that  the  proof  of  a  mere  verbal 
agreement  to  modify  can  be  accepted.  A  written  contract  should  con- 
tain within  itself  all  the  stipulations  between  the  parties. 

Mercantile  Ins.  Co.  vs.  Jaynes,  7  Ins.  Law  Jour.,  754;  Hearne  vs.  Ins.  Co.,  4 
Ins.  Law  Jour.,  582;  Aurora  Ins.  Co.  vs.  Eddy,  55  111.,  213. 

The  company  is  entitled  to  know  at  all  times  the  conditions  attached 
to  its  contracts,  and  the  precise  character  of  the  risks  it  is  assuming.  By 
just  so  much  as  the  original  policy  is  modified  by  subsequent  consent  of 
the  agent,  the  company  is  likely  to  be  uninformed  on  these  points. 
Such  modifications,  too,  are  almost  invariably  in  the  interest  of  the  insured 
and  usually  contemplate  an  increase  of  risk  without  any  increase  of  pre- 
mium. It  is  as  much  the  legal  duty  of  the  agent  therefore  to  notify  the 
company  of  any  modifications  as  of  the  terms  of  the  original  contract. 
Waivers  and  modifications  by  the  agent  which  were  unauthorized  by  or 
unknown  to  the  companies  have  entailed  more  losses  on  the  latter  than 
almost  any  other  one  cause  outside  of  the  fires  themselves. 

Where  the  policy  expressly  limits  the  agent's  powers  in  this  respect,  or 
requires  all  modifications  of  the  contract  to  be  indorsed  in  writing,  a  vi- 
olation by  the  agent,  besides  rendering  him  legally  liable  for  the  conse- 
quences, will  generally  prove  ineffectual  to  accomplish  the  object  sought. 
Where  the  agent's  power  is  thus  limited,  the  insured  is  bound  to  take  no- 
tice of  the  fact  at  his  own  peril.     In  Walsh  vs.  Ins.  Co.   (7  Ins.   Law 


77 

Jour.,  423)  the  policy  required  consent  to  be  indorsed  in  writing,  and 
the  agent,  who  had  power  to  contract,  verbally  consented  to  a  vacancy,  of 
which  he  made  a  memorandum,  but  made  no  indorsement  as  required 
on  the  policy.  The  court  said  :  * '  The  plaintiff  is  presumed  to  have 
known  what  the  contract  contained,  and  the  proof  tends  to  the  conclu- 
sion that  this  provision  was  brought  to  his  notice.  He  saw  fit,  however, 
to  accept  the  assurance  of  the  agent  that  an  entry  in  the  register  was  suf- 
ficient. It  is  difficult  to  see  how,  upon  the  law  of  contracts  and  agency, 
the  plaintiff  can  recover.  The  entry  in  the  register  was  not  an  in- 
dorsement on  the  policy.  The  oral  consent  was  an  act  in  excess  of  the 
known  authority  of  the  agent.  The  provision  was  designed  to  protect  the 
company  against  collusion  and  fraud,  and  the  dangers  and  uncertainty  of 
oral  testimony." 

See,  also,  Crescent  Ins.  Co.  vs.  Griffin,  14  Ins.  Law  Jour.,  278;  Enos  vs.  Ins,  Co., 
15  Ins.  Law  Jour.,  138. 

Again,  it  is  only  the  agent  who  is  authorized  to  issue  the  policy  in  the 
first  place  that  can  consent  as  a  rule  to  its  modification,  whether  by  in- 
dorsement or  otherwise.  A  solicitor  or  agent  whose  power  is  limited  to 
receiving  applications  can  sometimes  render  the  company  responsible  for 
information  furnished  to  him  at  the  time  of  receiving  the  application 
regarding  vacancy,  other  insurance,  alterations,  and  the  like,  because  he 
is  then  the  medium  of  communication  between  the  applicant  and  the 
company.  But  when  once  the  contract  has  been  completed,  his  rela- 
tions to  it  are  at  an  end.  As  he  had  no  power  to  make  it  so,  he  has  no 
right  to  consent  to  its  alteration. 

Wilson  vs.  Ins.  Co.,  4  Kern.,  418;  Sykes  vs.  Ins.  Co.,  34Penn.  St.,  79;  Robinson 
vs.  Ins.  Co.,  3  Dutch.,  134;  N.  E.  Ins.  Co.  vs.  Schettler,  38  111.,  166;  Strickland  vs. 
Ins.  Co.,  14  Ins.  Law  Jour.,  868. 

In  one  respect,  however,  the  relations  of  the  soliciting  agent  are  not 
always  ended.  Where  notice  is  required  to  be  given  for  the  mere  pur- 
pose of  information  to  the  company,  where  no  acquiescence  by  the  latter 
is  needed  and  no  party  is  specified  to  whom  it  must  be  given,  as  in  the 
case  of  notice  of  loss,  it  has  sometimes  been  held  that  notice  to  an  agent 
procuring  the  insurance  is  sufficient,  that  the  medium  through  whom  the 
insurance  was  procured  may  be  further  relied  on  to  convey  additional 
information.  But  this  doctrine  only  applies  to  those  cases  where  the  in- 
sured might  reasonably  assume  that  such  notice  was  sufficient. 

Hartford  Ins.  Co.  vs.  Smith,  7  Ins.  Law  Jour.,  140;  Union  Ins.  Co.  vs.  Wilkinson, 
13  Wall.,  222;  Schenck  vs.  Ins.  Co.,  4  Zab.,  447. 

In  general,  therefore,  a  soliciting  agent  should  regard  himself  as  with- 
out any  authority  to  act  in  respect  to  any  matters  pertaining  to  a  com- 


78 

pleted  contract,  and  should  so  state  to  the  insured  whenever  asked  to 
make  changes,  or  whenever  questioned  in  regard  to  his  authority  to  make 
changes,  but  for  greater  safety  should  communicate  to  the  company  all 
information  he  may  receive  regarding  it.  Especially  should  he  be  on 
his  guard  against  seeming  by  his  conduct  towards  the  insured  to  assume 
any  responsibility  in  relation  to  the  contract.  Even  though  a  soliciting 
agent  should  be  regarded  as  a  proper  party  to  receive  a  notice  of  loss, 
which  usually  he  is  not,  he  would  have  no  right  to  accept  notice  of  a 
vacancy,  increase  of  risk,  change  of  title,  incumbrance,  or  any  of  those 
matters  which  affect  the  character  of  the  contract,  and  which  might  in- 
fluence the  company  to  cancel  or  increase  the  rate.  In  short,  the  solic- 
itor, outside  of  the  special  work  for  which  he  is  employed,  has  properly 
no  relations  with  the  company  beyond  the  ordinary  duty  of  an  employe 
to  communicate  to  his  employer  such  facts  as  the  latter  ought  to  know. 

Harrison  vs.Ins.  Co.,  9  Allen,  231;  Miner  vs.  Ins.  Co.,  29  Wis.,  693;  Phoenix  Ins. 
Co.  vs.  Lawrence,  4  Met.,  9. 

Again,  it  does  not  necessarily  follow  that  because  an  agent  is  author- 
ized to  issue  policies,  he  is  therefore  authorized  to  make  any  subsequent 
modifications  of  any  kind  in  their  conditions.  As  was  said  in  Sohnes 
vs.  Ins.  Co.  (121  Mass.,  438),  something  more  than  a  special  agency 
must  be  shown  to  justify  such  a  conclusion  on  the  part  of  the  insured. 
Authority,  or  apparent  authority,  to  thus  act  as  a  general  agent  must  be 
established.  A  person  deals  with  the  agent  in  matters  in  excess  of  his 
apparent  special  authority  at  his  peril.  The  printed  conditions  of  a  pol- 
icy constitute  the  general  form  under  which  the  company  elects  to  issue 
its  contracts.  Blanks  are  left  in  this  form,  presumably  to  be  filled  up  at 
his  discretion  by  an  authorized  representative.  These  facts  may  be  re- 
garded as  in  a  measure  a  notice  both  to  the  agent  and  the  insured  that 
the  former  has  usually  no  right  to  mutilate  or  nullify,  or  introduce  any- 
thing inconsistent  with  the  printed  conditions  ;  that  in  those  respects,  at 
least,  even  the  powers  of  an  agent  authorized  to  contract  are  limited. 
He  has  no  right  to  contract  in  a  way  inconsistent  with  the  policy-blank. 
Thus,  in  Reynolds  vs.  Ins.  Co.  {^6  Mich.,  181),  an  attempt  was  made  to 
show  an  oral  contract  for  insurance  with  the  agenl  on  a  risk  belonging 
to  a  class  that  the  agent  was  not  allowed  to  insure  ;  but  the  court  held 
that  even  proof  of  the  fact  that  the  agent  solicited  the  risk  and  received 
the  premium  was  not  proof  of  his  power  to  bind  the  company  in  the  face 
of  his  commission  and  the  policy  to  the  contrary.  As  was  said  by  the 
court,  the  fact  that  he  was  local  agent  could  only  imply  authority  to  in- 
sure in  the  mode  allowed  by  the  charter,  and  to  take  such  risks  as  the 
policies  in  common  use  by  the  agents  would  warrant.     In  Barry  vs.  Ins. 


79 

Co.  (15  Ins.  Law  Jour,,  789)  an  agent,  who  had  no  authority  to  insure 
hulls,  undertook  to  insure  a  yacht  by  filling  in  a  cargo-blank  whose 
printed  language  was  wholly  inappropriate,  and  it  was  held  that  the  in- 
consistency was  sufficient  notice  to  the  insured  that  the  agent  was  exceed- 
ing his  authority.  To  this  class  also  belong  those  numerous  cases  where 
it  has  been  held  that  the  agent,  unless  vested  with  special  authority  for 
that  purpose,  has  no  right  to  waive  requirements  regarding  proofs  of 
loss. 

Sohnes  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  472,  and  cases  there  cited. 

The  safe  rule  for  the  agent  is  to  limit  all  indorsements  to  those  matters 
where  he  is  explicitly  authorized  by  the  company  thus  to  modify,  and, 
above  all,  to  avoid  such  as  shall  essentially  alter  the  character  of  the 
contract,  the  risk,  or  the  parties.  Where,  as  in  Massachusetts  and  New 
York,  a  standard  policy-form  is  prescribed,  any  modification  of  the  lan- 
guage whatever  beyond  that  which  the  law  permits  would  be  a  penal  of- 
fense against  statutory  law. 

Cancellation. 

When  the  agent  has  been  instructed  to  cancel  a  risk,  he  is  legally 
bound  to  carry  out  the  instruction  without  any  unnecessary  delay.  The 
penalty  to  which  he  is  exposed  in  case  of  negligence  was  illustrated  in 
the  recent  case  of  Phoenix  Ins.  Co.  vs.  Pratt,  in  the  i6th  Ins.  Law  Jour., 
already  cited,  where  the  agent  assumed  the  responsibility  of  delaying  un- 
til he  could  communicate  further  with  the  company.  The  risk  burned 
before  an  answer  could  be  received,  and  he  was  held  personally  liable 
to  the  company  for  the  loss. 

Two  things  are  essential  to  a  complete  cancellation  ;  notification  to 
the  insured  or  some  party  authorized  to  represent  him,  and  a  tender  at  the 
same  time  of  the  unearned  premium. 

Continental  Ins.  Co.  vs.  Bunsby,  15  Ins.  Law  Jour.,  736;  Griffey  vs.  Ins.  Co.,  15 
Ins.  Law  Jour.,  198;  .^Etna  Ins.  Co.  vs.  Weisinger,  14  Ins.  Law  Jour.,  151;  ^tna 
Ins.  Co.  vs.  Maguire,  51  EL,  342. 

The  notice  should  be  given  and  the  tender  made  to  the  insured  him- 
self if  possible,  or  if  not,  then  to  some  party  authorized  to  act  for  him  in 
the  matter,  and  the  policy  should  be  taken  up  and  returned  to  the  com- 
pany. It  by  no  means  follows  that  the  party  who  was  authorized  by  the 
insured  to  procure  the  insurance,  is  also  authorized  to  accept  a  notice  of 
cancellation.  This  has  often  proved  a  fatal  mistake  on  the  part  of  the 
agent.  The  true  doctrine  was  laid  down  in  Rothschild  vs.  Ins.  Co.  (7 
Ins.  Law  Jour.,  639),  where  it  was  held  that  an  agency  to  procure  in- 


8o 

surance  is  ended  when  the  insurance  is  procured  and  the  policy  deliv- 
ered to  the  principal ;  that  the  agent  to  procure  the  insurance  {i.  e.,  the 
broker)  has  no  power  after  the  delivery  of  the  policy  to  his  principal 
to  consent  to  a  cancellation.  In  Von  Wein  vs.  Ins.  Co.  (15  Ins.  Law 
Jour.,  158),  although  the  policy  contained  a  stipulation  that  the  party 
procuring  the  policy  should  be  deemed  the  agent  of  the  insured  in  mat- 
ters relating  to  the  insurance,  it  was  held  that  a  broker  employed  by  the 
insured  to  procure  the  policy  was  not  on  that  account  to  be  deemed  his 
agent  to  receive  notice  of  cancellation  ;  that  the  cancellation  did  not  re- 
late to  the  insurance.  A  broker  or  intermediary  can  only  be  safely 
dealt  with  where  it  can  be  satisfactorily  shown  that  the  entire  care  of 
managing  and  looking  after  his  insurances  has  been  placed  in  his  hands 
by  the  insured.  Thus  in  Gatti  vs.  Ins.  Co.  (9  Ins.  Law  Jour.,  158) 
it  appeared  that  the  party  who  procured  the  policy  and  paid  the  pre- 
mium was  allowed  entire  control  of  the  property,  collecting  and  using 
the  rents  in  his  own  way,  and  it  was  held  that  authority  to  cancel,  as  well 
as  to  insure,  was  within  the  apparent  scope  of  his  power. 

Notice  of  an  intention  to  cancel  is  not  sufficient.  It  must  be  a  notice 
of  actual  cancellation,  coupled  with,  a  tender  of  the  return  premium, 
and  the  amount  of  the  unearned  premium  must  be  tendered  in  cash  ; 
but,  if  no  cash  is  due,  simple  notice  is  sufficient.  Where  a  note  has 
been  given  this  should  be  returned,  unless  some  payment  on  it  is  due  or 
owing,  in  which  case  the  tender  should  still  be  cash. 

Bergesson  vs.  Ins.  Co.,  38Cal.,  541;  Bunsby  vs.  Ins.  Co.,  supra;  Griffey  vs.  Ins. 
Co.,  supra;  Hawthorn  vs.  Ins.  Co.,  55  Barb.,  28;  ^Elna  Ins.  Co.  vs.  Webster,  6 
Wall.,  129;  Emmott  vs.  Ins.  Co.,  7  R.  I.,  562;  Soulhside  Ins.  Co.  vs.  MuUer,  8  Ins- 
Law  Jour.,  260;  Home  Ins.  Co.  vs.  Curtis,  5  Ins.  Law  Jour.,  120. 

The  risk  should  also  be  canceled  on  the  agent's  register,  and  the 
return  of  the  policy  demanded  and  secured,  if  possible,  but  the  actual 
return  of  the  policy  is  not  essential  to  a  cancellation.  It  is  the  duty 
of  the  insured  to  return  it,  but  his  refusal  to  do  so  or  to  accept  the 
tender  will  not  keep  the  contract  in  force.  Where  cancellation  is  de- 
manded by  the  insured,  however,  he  is  usually  bound  to  tender  the  policy 
in  order  to  make  it  effectual,  if  in  his  possession. 

Grace  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  95;  Amer.  Ins.  Co.  vs.  Woodruff,  34  Mich.,  6. 

In  Grace  vs.  Ins.  Co.,  just  cited,  the  attempt  of  the  agent  to  cancel 
was  defeated  by  his  simply  notifying  the  insured  that  upon  the  return  of 
the  policy  he  would  cancel  it  and  refund  the  premium.  He  should 
have  tendered  the  premium  and  demanded  a  return  of  the  policy.  The 
insured,  however,  may  waive  the  immediate  repayment  of  the  premium 
if  he  chooses,  but  the  understanding  should  be  clear  that  the  contract  is 


8i 

regarded  as  ended  by  both  parties.     Cancellation  can  only  be  enforced 
by  either    party  by  virtue  of  the  policy-stipulation    to  that  effect,  and 
the  courts  insist  that  it  can  be  exercised  only  in  strict  compliance  with 
the  condition, 
^tna  Ins.  Co.  vs.  Weisinger,  14  Ins.  Law  Jour.,  86,  and  cases  there  cited, 

A  mere  solicitor  has  no  right  to  cancel  of  his  own  motion  ;  the  agent 
must  be  one  authorized  to  contract.  In  Jacobs  vs.  Ins.  Co.  (14  Ins. 
Law  Jour.,  633)  it  was  declared  that  a  power  to  receive  applications, 
premium-notes,  and  cash  premiums  does  not  include  a  power  to  cancel 
policies.  Nor  is  the  offer  to  prove  such  cancellaiion  helped  by  show- 
ing that  the  policy  was  sent  by  the  agent  to  the  company  as  a  surrendered 
policy,  unless  the  company  accepted  it  as  such.  But  a  solicitor  or  any 
other  party  may,  of  course,  cancel,  if  authorized  to  do  so.  The  most 
important  point  to  be  borne  in  mind  in  all  cases  is  that  no  cancellation 
will  be  regarded  as  effectual  by  the  court  until  whatever  may  be  due  as 
unearned  premium  has  been  actually  paid  or  tendered,  or  its  payment 
distinctly  waived  by  the  insured  himself  or  a  party  fully  authorized  to 
represent  him. 

The  natural  disposition  of  an  agent  to  regard  the  insured  as  a  client, 
whose  mterest  he  must  protect  by  securing  other  insurance  before  can- 
celing, has  sometimes  caused  litigation.  The  agent's  first  duty  is  to 
himself  and  his  company,  and  he  has  no  right  to  make  the  execution  of 
an  order  to  cancel  contingent  upon  his  ability  to  place  the  risk  else- 
where, thereby  rendering  himself  liable  in  case  the  risk  should  burn 
while  he  is  neglecting  the  instructions  of  his  company. 

^tna  Ins.  Go.  vs.  Maguire,  51  111.,  342;  Goit  vs.  Ins.  Co.,  25  Barb.,  189;  Train 
vs.  Ins.  Co.,  5  Ins.  Law  Jour,,  177.  See,  also,  Phoenix  Ins.  Co.  vs.  Pratt,  already 
cited. 

The  mere  possession  of  the  policy  by  another  will  not  justify  the  con- 
clusion that  he  is  authorized  to  surrender  it  for  cancellation.  In  Bennett 
vs.  Ins.  Co.  (115  Mass.,  241)  the  surrender  for  cancellation  of  a  policy 
by  the  assignee  who  held  it  as  security,  without  the  knowledge  of  the 
insured,  was  declared  invalid. 

Renewals. 

Renewals  have  not  unfrequently  proved  pitfalls  for  unwary  agents. 
The  general  doctrine  is  that  a  renewal  is  simply  an  extension  of  the 
original  contract.  The  effect  is  the  same  as  if  the  date  and  duration  of 
the  original  policy  were  altered  to  correspond  with  those  of  the  renewal- 
receipt.  All  the  conditions  and  stipulations  remain  as  at  first.  A  vio- 
lation of  any  will  have  the  same  effect  as  before  the  renewal  took  place. 


82 

Aurora  Ins.  Co.  vs.  Kranich,  6  Ins.  Law  Jour.,  676;  Sheppard  vs.  Ins.  Co.,  12 
Ins.  Law  Jour.,  817,  and  cases  there  cited. 

But  this  is  true  only  so  far  as  the  renewal  contemplates  no  change  in 
the  original  contract,  or  the  conditions,  so  far  as  known  to  the  insurer  or 
agent,  continue  the  same.  A  change  in  the  law,  such  as  the  passage  of 
a  valued-policy  act,  will  be  imported  into  a  subsequent  renewal. 

Brady  vs.  Ins.  Co.,  Ii  Mich.,  425. 

A  change  in  the  apparent  distribution  of  the  risk,  as  where  the  orig- 
inal policy  was  on  specific  items,  while  the  renewals  insured  only  a  gross 
sum,  will  convert  the  latter  into  a  general  insurance. 

Driggs  vs.  Ins.  Co.,  10  Barb.,  440. 

Any  changes  contemplated  in  the  original  contract  should  be  expressed 
in  the  renewal-receipt,  and  unless  such  changes  are  contemplated,  care 
should  be  taken  that  the  matter  should  not  be  left  in  doubt  through  the 
use  of  ambiguous  language.  In  Sheppard  vs.  Ins.  Co.  (12  Ins.  Law 
Jour.,  817)  the  agent  gave  a  renewal-receipt  some  weeks  after  the  termi- 
nation of  the  policy,  bearing  also  such  later  date  and  continuing  a 
year,  and  a  suit  was  required  to  determine  its  legal  eifect.  A  hasty 
promise  to  renew  may  be  unwise.  Such  promise,  if  an  actual,  com- 
pleted agreement,  amounts  to  an  oral  contract  of  insurance.  In  King 
vs.  Ins.  Co.  (13  Ins.  Law  Jour.,  146)  it  was  claimed  that  the  agent  had 
thus  promised  to  renew,  and  the  court  held,  that  if  the  evidence  showed 
not  merely  preliminary  negotiations,  but  a  verbal  contract  complete 
in  all  its  terms,  it  was  binding,  and  non-payment  of  premium  would 
not  defeat  the  insurance  until  demand  had  been  made  for  it,  or  the 
insured  had  been  notified  of  the  company's  refusal  to  carry  the  risk.  En- 
tries made  by  the  agent  in  his  register  were  not  admitted  as  evidence 
to  the  contrary. 

See,  also,  Roger  Williams  Ins.  Co.  vs.  Carrington,  9  Ins.  Law  Jour.,  577. 

But  in  O'Reilly  vs.  Corporation  (15  Ins.  Law  Jour. ,  83 )  a  mere  casual 
conversation  with  the  agent  requesting  renewal  at  a  subsequent  date, 
which  contemplated  further  action  and  where  no  premium  was  paid,  was 
not  recognized  as  a  valid  renewal  where  the  policy  stipulated  that  it 
should  not  be  liable  unless  the  premium  for  the  renewal  was  paid.  The 
agent  should,  therefore,  confine  himself  to  a  distinct  understanding  that 
the  policy  can  only  be  renewed  upon  the  payment  of  premium  and 
delivery  of  the  renewal-receipt.  After  an  agreement  to  renew  has  once 
been  made,  no  change  whatever  in  the  conditions  of  the  original  policy 
can  been  made  without  the  consent  of  the  insured.  In  Hay  vs.  Ins.  Co. 
(8  Ins.  Law  Jour.,  633)  a  second  policy  was  issued  in  compliance  with 


83 

such  an  agreement,  which,  unknown  to  the  insured,  contained  conditions 
not  in  the  first,  and  the  court  held  that  it  must  be  reformed  to  correspond 
with  the  first.  The  only  proper  course  for  the  company  would  have 
been  to  have  noiified  the  insured  that  it  declined  to  continue  under  the 
original  contract,  but  would  make  a  new  one  if  desired.  All  modifica- 
tions made  by  a  renewal,  therefore,  should  be  distinctly  brought  to  the 
notice  of  the  insured. 

What  to  Do  in  Case  of  Loss. 

Any  discussion  of  the  delicate  and  complicated  legal  questions  in- 
volved in  the  adjustment  of  losses  is  foreign  to  the  plan  of  this  book. 
The  work  of  the  adjuster  is  usually  intrusted  by  the  companies  to  ex- 
perts in  this  branch.  Familiarity  with  the  subject  by  the  ordinary  agent 
is  rather  discouraged  than  otherwise,  from  the  danger  that  the  agent  may 
be  tempted  to  act  on  a  limited  and  partial  knowledge,  and  thus  em- 
barrass rather  than  facilitate  a  satisfactory  settlement.  Almost  the  only 
things  which  the  ordinary  agent  requires  to  know  relating  to  adjustments 
are  what  not  to  do.  But  he  frequently  has  other  and  important  duties  to 
perform  in  the  interest  of  his  company  in  case  of  loss.  The  first  of 
these,  after  notifying  the  company,  is  to  care  for  the  proper  preservation 
of  the  damaged  property.  The  doctrine  of  abandonment,  so  familiar  in 
marine  insurance,  is  not  recognized  in  fire  insurance.  The  owner  can- 
not compel  the  company  to  accept  his  damaged  property  and  pay  him  its 
full  original  value  ;  he  retains  his  title  after  the  loss  as  before  it.  But  in 
practice  the  companies  sometimes  agree  to  take  the  damaged  stock  and 
are  entitled  to  do  so  upon  payment  of  a  constructive  total  loss. 
Whether  they  do  or  not,  the  agent,  as  the  representative  of  their  interests, 
is  entitled  to  take  such  steps  as  the  owner  may  permit  for  the  further 
protection  of  the  property.  But  in  doing  so  the  fact  should  be  borne 
in  mind,  that  the  damaged  goods  remain  the  property  of  the  insured  after 
the  fire  as  before  it.  It  is  at  his  risk,  must  be  cared  for  at  his  expense, 
and  he  has  no  right  to  claim  against  the  insurer  for  any  additional  loss 
or  damage  chargeable  to  his  own  negligence.  The  insured  is  bound  to 
do  all  in  his  power  to  save  his  property,  and  to  care  for  the  salvage. 

Arnold  on  Mar.  Ins.,  875  ;  Marshall  on  Mar.  Ins.,  497  ;  Wood  on  Ins.,  776. 

This  does  not  mean,  however,  that  he  must  seek  to  restore  it  to  its 
condition  before  the  fire,  but  simply  to  protect  it  against  theft  and 
further  deterioration.  He  is  not  bound  to  have  shirts  and  collars 
relaundried,  that  were  damaged  by  water. 

Hoffman  vs.  Ins.  Co.,  32  N.  Y.,  405. 


84 

The  agent,  therefore,  should  be  on  his  guard  against  relieving  the 
insured  of  these  responsibilities.  His  aim  should  rather  be  to  see  that 
they  are  assumed  and  properly  acted  on ;  for,  unless  the  insured  can  be 
shown  to  have  been  guilty  of  culpable  negligence;  usually  a  difficult 
thing  to  do;  the  loss  through  subsequent  deterioration  is  likely  to  fall 
on  the  company.  Another  duty  devolving  upon  the  agent  is  to  quietly 
acquire  such  information  regarding  the  circumstances  attending  the  loss 
as  will  aid  in  discovering  the  cause,  and  whether  any  fraud  has  been 
attempted;  that  class  of  facts,  in  short,  which  can  best  be  secured  by  one 
who  is  on  the  spot  at  the  time  and  is  familiar  with  the  surroundings. 

Naturally,  the  first  move  on  the  part  of  the  insured  will  usually  be  to 
consult  the  local  agent  about  the  recovery  of  his  damages  and  the  steps 
to  be  taken,  and  here  begins  the  chief  danger  to  the  company.  As  a 
rule  the  agent  should  never  seek  the  insured  for  this  purpose.  His 
duty  is  simply  to  promptly  notify  the  company  of  all  the  facts  in  his 
possession.  The  contract  requires  the  insured  to  seek  the  company, 
and  give  it  the  stipulated  notice  with  due  diligence.  When  a  particu- 
lar method  or  party  is  designated  in  the  policy,  the  notice  should  con- 
form to  the  requirement.  Otherwise  the  general  rule  is  that  a  verbal 
notice  to  the  local  agent  is  sufficient.  It  may  be  given  either  by  the 
insured  or  some  party  authorized  to  represent  him,  and  must  be  sufficient 
to  apprise  the  company  of  the  loss,  and  give  an  opportunity  for 
examination.     It  must  be  given  as  soon  as  possible. 

Platte  vs.  Ass'n,  6  Ins.  Law  Jour.,  595  ;  Hartford  Ins.  Co.  vs.  Smith,  7  Ins.  Law- 
Jour.,  401  ;  People's  Ins.  Co.  vs.  Spencer,  53  Perm.  St.,  353  ;  Sleeper  vs.  Ins.  Co., 
5  Ins.  Law  Jour.,  537  ;  Riggs  vs.  Ins.  Co.,  20  N.  H.,  198  ;  O'Brien  vs.  Ins.  Co.f  8  Ins. 
Law  Jour.,  517. 

The  agent,  therefore,  if  consulted  by  the  insured,  should  direct  him  to 
conform  to  the  policy-requirements,  and  should  inform  him  that  the  com- 
pany alone  has  authority  in  the  premises.  If  the  policy  requires  a 
written  notice,  he  should  insist  that  it  be  given  in  this  form  by  the  insured, 
and  then  immediately  forward  it  to  the  company.  If  the  stipulation  is  that 
it  be  given  to  a  particular  party,  as  the  secretary,  he  should  direct  the  in- 
sured to  so  send  it  By  failing  to  observe  these  rules,  the  agent  has  repeat- 
edly waived  a  proper  compliance  with  the  requirement  of  the  policy. 

Brink  vs.  Ins.  Co.,  6  Ins.  Law  Jovu-.,  707 ;  Bennett  vs.  Ins.  Co.,  6  Ins.  Law  Jour., 
189  ;  Home  Ins.  Co.  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  739. 

Above  all,  the  agent  should  strictly  refrain  from  expressing  any  opinion 
regarding  the  company's  liability.  The  hasty  denial  of  liability,  or  con- 
duct which  justified  the  insured  in  believing  that  it  would  be  useless  to 
attempt   a  compliance  with   the  policy-requirement  as  to  notice   and 


85 

proofs,  has  time  and  again  justified  him  before  the  courts  in  failing  to  do 
either. 

Lycoming  Ins.  Co.  vs.  Dunmore,  5  Ins.  Law  Jour.,  93  ;  Aurora  Ins.  Co.  vs.  Kranich, 
6  Ins.  Law  Jour.,  676;  Findeisen  vs.  Ins.  Co.,  15  Ins.  Law  Jour.,  90;  Karibo  vs. 
Ins.  Co.,  15  Ins.  Law  Jour.,  478  ;  Akin  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  341. 

Substantially  the  same  remarks  apply  to  proofs  as  to  notice  of  loss 
when  the  blanks  have  been  forwarded  to  the  agent,  except  that  the  proofs, 
being  intended  as  evidence  to  the  company  of  the  exact  nature  and 
extent  of  its  liabilities,  should  always  be  in  writing,  deliberately  prepared, 
and  with  a  strict  observance  of  every  requirement. 

Columbian  Ins.  Co.  vs.  Rogers,  2  Pet.,  52  ;  Savage  vs.  Ins.  Co.,  52  N.  Y.,  502 ; 
Bumstead  vs.  Ins.  Co.,  12  N.  Y.,  8r ;  Jennings  vs.  Ins.  Co.,  2  Den.,  75  ;  Hartford 
Ins.  Co.  vs.  Smith,  7  Ins.  Law  Jour.,  108. 

Proofs  should  always  be  made  by  the  insured,  if  possible,  or  his 
authorized  representative.  In  his  absence  they  may  be  made  by  a  party 
naturally  authorized  to  represent  him,  or  in  such  a  case  they  may  be  made 
by  the  party  in  interest  to  whom  the  loss  is  payable. 

Kemochen  vs.  Ins.  Co.,  17  N.  Y.,  428  ;  Pratt  vs.  Ins.  Co.,  55  N.  Y.,  505  ;  Ayersvs. 
Ins.  Co.,  17  Iowa,  176. 

As  in  the  case  of  the  application,  they  should  be  filled  by  the  insured, 
if  possible,  but  he  is  entitled  to  such  information  as  is  necessary  to 
make  them  satisfactory  and  complete  in  their  form.  It  is  the  duty  of 
the  insurer  to  point  out  defects  which  he  desires  to  have  remedied. 

Blake  vs.  Ins.  Co.,  12  Gray,  265  ;  Clarke  vs.  Ins.  Co.,  6  Cush.,  324  ;  Young  vs. 
Ins.  Co.,  6  Ins.  Law  Jour.,  549  ;  Mason  vs.  Ins.  Co.,  6  Ins.  Law  Jour.,  842. 

In  fine,  the  chief  duty  of  the  agent  after  the  loss  may  be  summed  up  as 
that  of  aiding  the  insured  in  complying  with  all  the  requirements  of  his 
contract,  and  avoiding  everything  which  may  give  him  ground  for  claim- 
ing that  such  compliance  has  been  excused.  The  whole  question  of 
subsequent  liability  belongs  to  the  company  and  its  adjuster.  The 
agent  is  under  no  obligation  to  discuss  it,  and  should  refer  the  insured 
to  them  for  any  information  on  the  subject.  If  by  accident  the  policy  is 
lost  or  burned,  the  insured  is  not  prejudiced  in  his  rights  thereby.  He 
is  entitled  to  such  facts  in  relation  to  it  in  making  out  his  proofs  as  the 
agent  may  possess. 

Mutual  Insurance. 

In  what  has  been  said  heretofore,  special  reference  has  been  had  to 
the  law  governing  in  the  case  of  ordinary  stock  companies,  but  the 
same  principles   control   in   the   case   of  mutual   companies,  except  as 


86 

they  may  be  modified  by  the  peculiarities  of  the  latter  form  of  insur- 
ance. In  some  important  respects,  however,  the  legal  relations  of  the 
parties  in  mutual  and  in  stock  companies  are  essentially  different,  and 
these  diiferences  impose  their  modifications  on  the  law  in  the  two 
cases.  In  the  stock  company  the  corporate  members  or  pitjprietors 
and  the  insured  are  two  distinct  classes,  sustaining,  in  a  mercantile 
sense,  antagonistic  relations  to  each  other.  In  the  mutual  company,  on 
the  contrary,  they  constitute  a  single  class ;  the  insured  are  also  hy 
virtue  of  that  relation  the  stockholders.  The  consequence  of  this  dis- 
tinction is  that  the  insured  member  in  a  mutual  company  is  assumed 
to  be  possessed  of  a  knowledge  of  its  corporate  powers  and  business 
rules  and  methods,  and  to  be  vested  with  a  responsibility  for  his  own 
acts  which  are  not  attributable  to  an  ordinary  policy-holder.  In  the 
language  of  the  court  in  Krug  vs.  Ins.  Co.  (5  Ins.  Law  Jour.,  7),  per- 
sons insuring  in  mutual  companies  are  associated  in  the  nature  of 
limited  or  special  partners,  and  they  sustain  towards  the  companies  in 
many  respects  the  relations  of  partners  rather  than  those  of  customers. 
In  a  word,  the  member  is  ordinarily  bound  by  the  charter  and  by-laws 
of  the  company,  whether  he  has  any  actual  knowledge  of  them  or  not. 

Fuller  vs.  Ins.  Co.,  4  Ins.  Law  Jour.,  841,  and  cases  there  cited  ;  Hackney  vs.  Ins. 
Co.,  4  Barr.,  185  ;  Hope  Ins.  Co.  vs.  Beekman,  47  Mo.,  93. 

The  charter  and  by-laws  of  the  company  enter  by  implication  into  all 
its  contracts,  whether  they  are  expressed  in  the  policy  or  not.  The 
insured  is  not  usually  allowed  to  plead  ignorance  concerning  them,  nor 
to  claim  that  he  was  misled  in  regard  to  them.  Whatever  is  done  by 
the  officers  within  the  scope  of  their  authority  he  is  bound  by.  , 

Diehl  vs.  Ins.  Co.,  58  Pa.  St.,  443  ;  Coles  vs.  Ins.  Co.,  18  Iowa,  426  ;  Hackney  vs. 
Ins.  Co.,  supra. 

One  important  consequence  of  this  peculiar  relationship  is  that  the 
agent  of  a  mutual  company  is  more  restricted  in  his  powers,  and 
assumes  less  responsibility  in  his  dealings  with  the  insured  than  in  the 
case  of  a  stock  company.  Thus,  in  the  case  of  Hackney  vs.  Ins.  Co., 
supra,  representations  of  the  agent  regarding  the  limitations  of  the 
company's  business  were  set  up  by  the  insured  in  defense,  but  the  court 
declared  that  even  false  representations  by  the  president  would  not 
affect  the  case.  So,  in  Hale  vs.  Ins.  Co.  (6  Gray,  169),  the  by-laws 
required  written  consent  of  the  president  to  subsequent  insurance,  and 
it  was  held  that  his  verbal  consent  was  not  sufficient  to  waive  the  re- 
quirement. Again,  in  Brewer  vs.  Ins.  Co.  (14  Gray,  203),  the  by-laws 
made  payment  of  premium  a  prerequisite  to  insurance,  and  it  held 
that  no  officer  of  the  company  could  waive  the  provision.     In  Smith 


«7 

vs.  Ins.  Co.  (24  Pa.  St.,  320)  the  agent  made  statements  m  the  applica- 
tion with  the  consent  of  the  insured  which  were  untrue,  with  the  under- 
standing that  the  facts  should  be  made  to  correspond  with  the  state- 
ment, and  the  court  declared  that  in  a  mutual  company  the  agent  had 
no  power  to  enter  into  such  an  agreement. 

But  the  most  important  feature  of  mutual  insurance  is  the  liability 
which  it  imposes  on  the  members.  As  in  ordinary  partnership,  the 
members  are  liable  for  the  debts  of  the  company,  and  the  extent  of 
this  liability  is  only  limited  by  the  provisions  of  the  charter  and  their 
several  contracts.  Even  though  a  member  has  lost  all  rights  under  his 
policy  by  a  violation  of  its  terms,  this  does  not  release  him  from  lia- 
bility for  losses  to  others.  In  Commonwealth  vs.  Ins.  Co.  (5  Ins.  Law 
Jour.,  864)  the  policies  had  expired,  but  were  subsequently  renewed, 
the  renewals  being  dated  back,  on  the  assurance  of  the  secretary  that  the 
company  was  sound  and  strong.  On  the  contrary,  heavy  losses  had 
occurred  in  the  interval  before  renewing,  and  the  insured  was  held  liable 
to  assessment  for  their  payment. 

Not  only  are  the  members  thus  liable  for  losses  among  themselves,  but 
where  the  company  undertakes  to  do  business  also  on  the  stock  or  non- 
participating  plan  they  are  in  the  same  position  as  ordinary  stockholders, 
and  may  be  assessed  for  the  payment  of  losses  on  such  non-participating 
policies. 

Schimpfvs.Ins.Co.,  7  Ins.  Law  Jour.,  663;  Hayes  vs.  Ins.  Co.,  10  Ins.  Law  Jour.,  507. 

The  questions  which  excite  the  most  controversy  in  connection  with 
mutual  insurance  are  those  respecting  the  rights  and  liabilities  of  the 
members  on  account  of  their  premium-notes.  In  the  ordinary  mutual' 
company  the  premium-note  fulfills  the  twofold  function  of  premium 
and  capital.  Sufficient  cash  only  is  required  to  meet  current  or  expected 
demands,  while  a  note  subject  to  assessments  is  given  for  such  sum  as  the 
charter  or  by-laws  may  prescribe. 

Hayes  vs.  Ins.  Co.,  10  Ins.  Law  Jour.,  507. 

The  general  doctrine  regarding  such  notes  is  that  laid  down  in  Com- 
monwealth vs.  Ins.  Co.  (3  Ins.  Law  Jour.,  15),  that  a  deposit-note  given 
to  a  mutual  company,  aside  from  special  stipulations,  is  just  as  com- 
pletely within  the  control  of  the  corporation  as  a  cash  premium,  and 
may  be  assessed  at  the  option  of  the  company. 

See,  also,  Nashua  Ins.  Co.  vs.  Moore,  4  Ins.  Law  Jour.,  494,  and  cases  there  cited. 

Assessments,  however,  must  generally  be  equitable  as  between  the 
members,  and  where  limitations  are  prescribed  in  the  liability,  as  for  cur- 
rent losses,  the  fact  of  such  losses  must  be  shown.     But  the  total  destruc- 


88 

tion  of  the  insured  property  will  not  release  from  liability  to  assessment 
until  the  insurance  term  is  ended,  nor  will  a  forfeiture  of  his  rights  by 
the  insured  have  this  effect.  It  has  even  been  disputed  how  far  the  sur- 
render and  cancellation  or  the  expiration  of  the  policy  will  release  from 
liability  in  some  cases. 

Planters'  Ins.  Co.  vs.  Comfort,  4  Ins.  Law  Jour. ,  847,  and  cases  there  cited  ;  N.  H. 
Ins.  Co.  vs.  Rand,  4  Fost.,  429 ;  Sterling  vs.  Ins.  Co.,  32  Pa.  St.,  75  ;  West  Branch 
Ins.  Co.  vs.  Smith,  5  Ins.  Law  Jour.,  319. 

It  will  thus  be  seen  that  the  relations  and  responsibilities  of  a  mutual 
policy-holder  like  those  of  an  ordinary  business  partner  essentially  modify 
in  many  respects  the  powers  and  obligations  of  an  agent  of  the  corpora- 
tion in  dealings  between  the  two.  The  general  doctrine  is,  that  the 
agent  of  a  mutual  company  is  more  restricted  in  his  powers  than  the 
agent  of  a  stock  company,  both  as  to  the  terms  and  conditions  of  the 
contract  itself,  and  the  waiver  of  its  provisions.  In  some  States  the 
courts  hold  these  powers  to  be  absolutely  limited  by  the  charter  and 
by-laws.  Any  agreement  in  contravention  of  these,  whether  by  officer 
or  agent,  is  held  invalid.  The  agent  is  treated  as  a  representative  of  the 
applicant  as  well  as  of  the  company,  and  misstatements  or  omissions  by 
him  in  the  application  are  regarded  as  if  done  by  the  insured. 

Jenkins  vs.  Ins.  Co.,  7  Gray,  370 ;  Barrett  vs.  Ins.  Co.,  7  Cush.,  175  ;  Holmes  vs. 
Ins.  Co.,  10  Met.,  211  ;  Smith  vs.  Ins.  Co.,  24  Penn.  St.,  320. 

But  in  many  of  the  States  a  more  equitable  view  of  the  relations 
of  the  parties  is  taken,  and  the  rights  of  the  applicant  who  has  not 
yet  become  a  member,  and  may  therefore  be  presumed  ignorant  of  the 
rules  of  the  company,  and  even  of  a  member,  are  guarded  as  in  ordinary 
stock  insurance,  in  so  far  as  a  liberal  construction  of  the  charter  and 
by-laws  will  permit.  Thus,  in  Peck  vs.  Ins.  Co.  (22  Conn.,  575),  the 
consent  of  an  agent  to  other  insurance  where  the  company  knew  he  was 
in  the  habit  of  giving  such  consent,  was  held  to  be  equivalent  to 
the  consent  of  the  directors  which  was  required  by  the  charter.  So,  in 
Bebee  vs.  Ins.  Co.  (25  Conn.,  51),  the  failure  of  the  agent  to  communi- 
cate material  facts  stated  to  him  by  the  applicant  was  held  to  be  charge- 
able to  the  company,  and  not  to  the  applicant. 

Columbian  Ins.  Co.  vs.  Cooper,  50  Penn.  St.,  331 ;  Woodbury  Savings  Bank  vs. 
Ins.  Co.,  31  Conn.,  517  ;  Eilenberger  vs.  Ins.  Co.,  8  Ins.  Law  Jour.,  822  ;  Knox  vs. 
Ins.  Co.,  10  Ins.  Law  Jour.,  89. 

Inland  Underwriting. 

Inland  underwriting  as  practiced  in  this  country  combines  many  of  the 
elements  of  both  fire  and  marine  insurance,  and  the  law  regulating  it 


89 

largely  depends  upon  whether  the  issue  pertains  to  the  one  branch  or  the 
other.  Usage  occupies  a  much  more  prominent  place  here  than  in 
ordinary  fire-underwriting.  The  construction  of  the  contract  and  the 
rights  of  the  parties  often  depend  upon  the  customs  peculiar  to  our  lake 
and  river  navigation,  and  a  thorough  understanding  of  these  is  of  the  first 
importance  to  the  agent  engaged  in  this  branch,  as  well  as  a  general 
knowledge  of  the  principles  regulating  marine  insurance.  The  trans- 
port policies  usually  employed  in  case  of  merchandise  risks  are  of 
three  kinds.  One  is  an  open  policy  on  which  shipments  reported  by' 
the  insured  from  time  to  time  are  indorsed  by  the  agent  at  such  rates  as 
may  in  each  case  be  agreed  to,  each  indorsement  being  in  effect  a  new 
insurance  subject  to  the  terms  of  the  contract  which  the  agent  is  free  to 
make  or  not  as  he  may  elect  The  second  is  a  general  contract  between 
the  company  and  the  insured,  in  which  the  former  undertakes  to  cover 
all  transportation  risks  of  a  certain  kind  at  prescribed  rates  of  premium. 
The  risks  are  by  agreement  reported  at  stated  times,  to  be  indorsed  on 
the  policy ;  but,  unless  this  agreement  is  violated,  the  liability  does  not 
depend  on  the  indorsement  The  third  class  embraces  those  contracts 
which,  as  in  ordinary  fire  insurance,  are  confined  to  specific  risks  agreed 
upon  at  the  outset 

Classes  of  Policies. 

The  courts  draw  an  important  distinction  between  policies  like  the 
ordinary  fire-insurance  contract,  where  the  actual  value  of  the  subject  or 
of  the  insured's  interest  is  not  stated,  and  those  where  a  definite  value  is 
named  in  the  contract  itself.  The  former,  popularly  known  as  open 
policies,  require  the  loss  claimant  to  prove  the  existence  and  amount  of 
his  interest,  while  the  latter  fix  the  liability  in  case  of  loss  by  agreement, 
ment,  and,  except  in  case  of  fraud,  no  proof  of  value  is  required.  It  is 
manifest  that  a  valued  policy  often  furnishes  strong  temptation  to  fraud, 
and  the  character  of  the  parties  as  well  as  the  facts  should  be  closely  scruti- 
nized in  those  cases  where  this  form  of  contract  is  employed.  The 
curse  of  what  are  known  as  valued-policy  laws  is  that  they  thus  convert 
the  open  policy  into  this  form  of  contract,  and  even  fraud  is  not  recog- 
nized as  a  defense. 

Sturm  vs.  Ins.  Co.,  5  Ins.  Law  Jour.,  209 ;  Bammessel  vs.  Ins.  Co.,  7  Ins.  Law 
Jour.,  767. 

The  year  is  the  natural  unit  according  to  which  policies  are  divided 
into  long  and  short  terms,  and  the  rates  are  usually  fixed  on  a  commu- 
tation-scale diminishing  proportionably  with  the  duration  of  the  con- 
tract    Hence  arises  the  rule  for  cancellation  according  to  which  the  pre- 


90 

mium  charged  as  earned  is  the  same  as  would  have  been  the  short  rate 
charged  for  the  same  length  of  time.  But  the  right  to  enforce  this  rule 
depends  wholly  on  the  stipulation  to  that  effect  in  the  policy,  and  the 
short  rate  is  that  which  is  customary  in  such  cases. 

Correspondence  by  Mail. 

Unless  there  is  a  special  stipulation  to  that  effect,  the  mere  sending  of 
a  communication  by  mail  is  not  a  legal  notification  to  the  party  of  the 
'contents  of  the  communication  until  he  receives  it.  The  sender  takes 
the  risk  of  its  miscarriage  or  failure  to  reach  him.  This  is  an  important 
fact  for  agents  to  bear  in  mind  in  their  correspondence  with  applicants 
and  with  the  insured.  But,  on  the  other  hand,  so  far  as  the  sender  is 
concerned,  the  communication  is  usually  complete  and  beyond  recall  the 
moment  it  has  been  mailed,  whether  the  party  to  whom  it  is  addressed 
has  actually  received  it  or  not.  The  moment  an  agent  mails  his  accept- 
ance of  a  proposition  to  insure,  he  closes  the  bargain.  In  Eames  vs. 
Ins.  Co.  (6  Ins.  Law  Jour.,  689)  the  general  agent  insisted  upon  a  cer- 
tain rate  as  conditional  to  the  acceptance  of  a  risk.  The  applicant  wrote 
to  the  local  agent  agreeing  to  the  rate,  and  the  latter,  in  turn,  wrote  the 
general  agent  to  the  sanle  effect,  and  requesting  that  a  policy  be  sent,  but 
directly  after  countermanded  the  order  by  telegram  on  account  of  the 
destruction  of  the  building.  It  was  held  that  the  contract  had  been 
completed. 


APPENDIX. 

Page  17,  last  paragraph :  "The  contract  is  only  complete  when  the  insured 
has  received  the  notice  of  its  acceptance."  In  some  States,  as  in  the  code  of 
Georgia,  mailing  an  acceptance  completes  the   contract. 

Page  47,  fourth  paragraph :  "  They  [common  carriers]  cannot  escape 
the  consequence  of  such  as  are  due  to  their  own  negligence."  This  is  the 
general  doctrine  as  laid  down  by  the  Supreme  Courts  of  the  United  States, 
and  most  of  the  States.  It  has  been  held  in  New  York,  however,  that  a 
carrier   may  limit  against  loss  by  negligence. 

Blair  vs.  R.  R.,  66  N.  Y.,  313,  and  cases  cited. 

Page  81,  first  paragraph:  "It  [cancellation]  can  be  exercised  only  in 
strict  compliance  with  the  conditions."  In  Hollingsworth  vs.  Germania  Ins. 
Co.  (45  Geo.,  294)  the  policy  had  been  surrendered,  and  return  premium 
directed  to  be  paid  to  an  agent  of  the  insured,  payment  was  delayed,  but 
made  and  accepted  after  the  loss,  but  before  either  party  knew  the  fact.  The 
policy  Was  held  to  be  in  force. 


INDEX. 


Abandonment  in  fire  insurance S3 

Adjacent  buildings 3^ 

Adjustment — Powers  of  general  agent 11 

— In  case  of  non-concurrency 74>  75 

— Agents'  relations  to 83 

Agent — His  legal  relations  to  his  principal 5-^ 

— Commission  of S 

— Prosecution  by  principal 5 

— Representation  of  adverse  interests 6 

— Contract  with  himself 6 

■ — Accounting  by 7 

— Delegation  of  authority 7 

— Revocation  of  authority 8 

— Broker,  status  of. , . . . .     9 

— General,  powers  of 10 

— Special,  powers  of 11 

— Doctrine  of  waiver  in  its  relations  to 13 

— Caution  as  to  insuring 55 

^Waiver  of  other  insurance  by 65 

— Indorsement  and  modifications  by 76-79 

— Authority  of  soliciting  as  to  notice 77i  7^ 

— Cancellations  by 79"8l 

— Duties  of  in  case  of  loss 83-85 

— Of  mutual  company,  responsibilites  of 86,  88 

Alienation— Effect  of 56,  57 

Alterations  and  repairs 7^ 

Application—  Should  be  in  writing 15 

— Should  be  promptly  forwarded 17' 

^Duties  of  Agent 17>  *9 

— Fillmg  in 20-22 


92 

ApportionmMit — In  case  of  non-concurrency 74,  75 

As  interest  may  appear 55 

Assessments — In  case  of  mutual  companies 87 

Assignments — Execution  of , 57 

Bailments 5° 

Broker — Status  of  as  an  agent 9 

Building — What  is  included  in 24,  25 

— Description  of 32-34>  36-39 

— Internal  Appurtenances  of 38 

— Ownership  of 43,  44 

— ^Value  of 62 

— Alterations  and  repairs  of 72 

Cancellation  and  transfer  of  policy 66 

— What  is  essential  to. 79*^^ 

—Rule  for 89 

Carriers — Insurance  of 49 

Cash  value 61 

Caution  to  agents  as  to  insuring 55 

Coal-oils JO,  71 

Concurrency — In  case  of  other  insurance 64 

— In  policy-writing 74 

Consequential  damages 47 

Consignees — Insurance  of 48 

Contained  in 27,  28,  37 

Contents 29 

Contract — Powers  of  general  agent 10 

— Powers  of  special  agent 11 

— By  correspondence 90 

Correspondence  by  mail d..., 90 

Creditors'  liens — Insurance  of S^'SS 

Defective  descriptions 34-36 

Delivery — Of  policy,  cautions  regarding , , 18 

Description — Effect  of  erroneous 26 

—Of  risk 30-40 

— Defective  illustrated 34-36 

Double  insurance 62-66 

Dwelling — What  is  included  in 25 

— Vacancy  in  case  of. 66,  67 

Estates — Qualified  and  limited ; 46 

Explosives 70»  7* 

Exposures — Description  of 37 


93 

Faotory — What  is  included  in 25 

— Vacancy  in  case  of. 68,  69 

Fixtures — Meaning  of 23 

— Ownership  of. 45 

Force-pumps 39 

Foreclosure — Effect  of 58 

Fraud  in  valuation 60 

Furniture — Meaning  of 29 

Gas  machines 71 

Goods — See  merchandise. 

— On  storage 49 

Gram — Meaning  of 35 

— In  warehouse 48 

Gunpowder 70,  71 

Heating  and  lighting 38 

Held  in  trust 51 

House— What  is  included  in 24,  25 

Household  goods— Meaning  of. 29 

Incidents  connected  with  the  title 56-59 

Increase  of  risk  generally — See  risk. 72 

Incumbrance — Effect  of.     See  mortgages 56-59 

Indorsements  and  modifications  by  agent 76-79 

Inflammables 70,  71 

Inland  underwriting 88 

Insolvency — Effect  of. 58 

Insurable  interest — See  interest 

Insurance — Who  are  entitled  to 22,  23 

— Subject-matter  of 24  32 

Insured — Who  may  be , 22,  23 

Interest — Insurable. 22,  23 

— Specific 43-56 

— Qualified  and  limited 46 

—Change  of 56,  57 

Internal  appurtenances  of  buildings 38 

Judgments 52 

Language — Choice  of 21,  22 

Liens — Insurance  of 52-55 

Life-estates 46,  47 

Lighting  and  heating 38 

Live-stock 33>  36 

Location  and  surroundings  of  risk 36 


94 

Xoss— What  to  do  in  case  of 83-85 

Machinery — What  is  included  in 26 

Market  value 61 

Measure  of  damages 59 

Memorandum  articles 31 

Merchandise — Meaning  of  terms 29,  35 

Mill — What  is  included  in 25 

Mortgage-clause 54 

Mortgagees — Insurance  of 52-55 

Mortgages — See  incumbrances. 

— ^Judgments,  and  other  liens 52-55 

Mutual  insurance— Legal  principles  governing 85-88 

Notice — Authority  of  solicitor 77,   78 

— Duties  of  agent  regarding 84 

Occupancy 66-69 

Occupation  of  premises 41 

Other  insurance 62-66 

— Precautions  regarding 75 

Ownership — Nature  of 43-46 

Partners 44 

Payable  to  whom  it  may  concern 55 

Personal  property — Insurance  of 27,  31,  33 

— Ownership  of 44,  45 

Policy — Caution  as  to  delivery 12 

— Filling  in 20-22 

— Transfer  of 66 

— Writing — Concurrency  in 74,  75 

— Indorsements  and  modifications  of 7^-79 

— Accidental  loss  of 85 

— Long  and  short  term 89 

— Open  and  valued 89 

— Inland ' 89 

Preliminary  negotiations  and  the  premium 14 

Premium — And  preliminary  negotiations 14-20 

— Payment  of 18,  19 

— Notes — In  case  of  mutual  companies 87 

Printed  policy-forms 75 

Prohibited  risks 30,  70,  71 

Proofs  of  loss — Preparation  of 85 

Property — Not  their  own — Insurance  of 5°~52 

Qualified  and  limited  estates 4^ 


95 

^Receipt — Ad  interim l6 

JRenewal — Caution  as  to  delivery 12 

—  Effect  on  incumbrances 59 

— Legal  principles  governing 81-83 

Rentals— See  tenancies. 

— Insurance  of 47 

Repairs  and  alterations 72 

Replacement — as  a  measure  of  value 61 

Risk — Description  of • 30-40 

— Location  and  surroundings  of 36 

— Increase  of  from  exposures 37 

— Transfer  of 66 

—Prohibited 70,  71 

— Increase  of  generally 72 

Salvage — Treatment  of 83 

Sold  but  not  removed 45,  52 

Specific  descnption  of  the  property 32-34 

— Insurance — Importance  of 75 

— Titles  or  interests ...    .' 43-56 

Special  hazards — Details  regarding 42 

Storage  risks — See  warehouse 49 

Store — What  is  included  in 25 

Survey — In  case  of  special  hazards 42 

Tenancies } 44>  46»  47>  5^ 

Title— Specific 43-56 

—Change  of 56,  57 

Tools — What  are  included  in 26 

Trusteeships 47"50 

Use  or  occupation  of  premises , 41 

Vacancy. 66-69 

Valuation  of  insured  property 59-^2 

Valued-policy  law 59 

Verbal  contracts — Should  be  avoided 15 

— When  complete 16,  17 

Waiver — Doctrine  of 13 

Waiver  of  other  insurance 65 

Warehouse  risks 48,  49,  5 1 

Watchmen , 39 

Water  supply 39 

What  to  do  in  case  of  loss 83-85 


University  of  California 

SOUTHERN  REGIONAL  LIBRARY  FACILITY 

Return  this  material  to  the  library 

from  which  it  was  borrowed. 


^J 


A     000  712  121     7 


o 

>\n~" 

^^\vx 

